Delayed Indicators

Delayed Indicators

We have already studied in previous articles that lagging indicators such as MACD and moving averages will identify trends once these have been established. Although a late operation is likely to open with them, they are less likely to be wrong.

In the following 1 hour EUR / USD chart, there was a MACD uptrend at 3:00 am on 08/03/05 and the 10 EMA period (exponential moving average) crossed the 20 EMA period at 5: 00am. These two signals were accurate, but if you did not wait for both indicators to give you the buyer's signal, you would probably have missed the chance. If you calculated from the beginning of the upward trend at 10:00 pm on 02/08/05 until the closing of the candle at 5:00 am on 03/08/05, you had a gain of 159 pips.

[caption id="attachment_647" align="aligncenter" width="525"] Delayed Indicators[/caption]

Now let's look again at the same graph to see how sometimes these signals can be false. Look how there was moving down with MACD after the rise we talked about earlier.

10 hours later, 20EMA crossed below 10EMA giving a buy signal. As you can see the price did not fall, but it was moving on both sides, then continued its rise. By the time both indicators agreed, you would have opened a position at the end and secured a loss.

[caption id="attachment_648" align="aligncenter" width="525"] Delayed Indicators[/caption]

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.