Lagging Indicators (part 2)
March 13th, 2007 by daryLagging indicators typically are more effective when the underlying equity is trending i.e. when the price movement is consistently setting higher highs and higher lows while in an upward trend, followed by a period when the price movement is consistently forming lower highs and lower lows and so on.
Lagging indicators are not effective when used in market conditions where the underlying price movement of the equity is trading sideways or without a definite trend, such as being tightly range bound between support and resistance levels or trend lines.
For example lets take a look at Walgreen using a 50 day Exponential Moving Average.
When Walgreen was trending the moving average produced ‘clean’ buy and sell signals. However in early 2007 when Walgreen started to trade sideways, the moving average indicator started to produce ‘noisy’ or ‘false’ buy and sell signals. As with the MACD indicator, you can use TimeToTrade moving average triggers to notify you when the price rises above or falls below the moving average.
You can use the TimeToTrade Moving Average triggers to notify you when the Price rises or falls below its moving or exponential moving average, or for example when one moving average crosses another.