Indicators are used for identifying patterns out of all the ups and downs in the forex market. In any case, indicators get the raw market data feed, and spit out probable trading scenarios. Just remember that they are not instruments for predicting the market. We use them to possibly identify opportunities which we could use to our advantage. The indicators must be used with an appropriate money management strategy (which is probably the most important thing in trading on margin).
• Lagging Indicators
The so-called lagging indicator gives a signal after the trend has started notifying you that the trend is up and going.
• Leading Indicators
This type of indicator gives a signal before a new trend has started or a reversal is on the way. This sounds great. It definitely sounds better than lagging indicators, right? The problem is that these are prone to bogus signals, also called “fake-outs”. Remember: if it’s too good, it’s probably not true.