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Chapter 13, Part II. Leading Indicators – Oscillators.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Jul 7, 2011.

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  1. Administrator

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    Sep 24, 2007
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    Part II. Leading Indicators – Oscillators. [​IMG]
    Commander in Pips: So, today we will talk about leading indicators. First we will discuss the common approach – which indicators usually treated as “leading”. Then we will explain why it is not quite correct and give us better understanding about “leading” term of indicators.

    Pipruit: That’s nice.​


    Commander in Pips: So most common approach to leading indicators tells that Oscillators are leading indicators. Oscillators are a type of indicator that have limited range of changing. Other words – these are scaled indicators. Excellent examples of oscillators are Stochastic and RSI. The second typical issue of oscillators – they usually are either in buy or sell mode, except for moments when it stands in a middle range. It has been argued that Oscillators give early signals of trend shifting, so because of that they are “leading” indicators.

    Commander in Pips:

    So, let’s plot three oscillators that we’ve discussed in previous part and see, what kind of signals they generate. These will be RSI, Parabolic SAR and Stochastic:

    Chart #1 | GBP/USD Weekly, RSI, Stochastic and Parabolic SAR

    Here you can see, that all three indicators give the same signals at the same time, although parabolic SAR has small lag behind stochastic and RSI. But in general – these signals have come almost simultaneously. In December 2004 this was a Sell signal that led to a solid move down. Right at the end of this down thrust all three indicators showed a Buy signal in August 2005 and the market has shown nice move up, although it wasn’t as impressive as previous downward move. The same has happened again in December 2005. So this picture tells that these three different indicators give very harmonic signals.
    #1 Administrator, Jul 7, 2011
    Lasted edited by : Mar 25, 2016
    Hamza Samiullah and fran alvarez like this.
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