Lagging Indicator

AAA

DEFINITION of 'Lagging Indicator'

1. A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.

2. A technical indicator that trails the price action of an underlying asset, and is used by traders to generate transaction signals or to confirm the strength of a given trend. Since these indicators lag the price of the asset, a significant move will generally occur before the indicator is able to provide a signal.

INVESTOPEDIA EXPLAINS 'Lagging Indicator'

1. Lagging indicators confirm long-term trends, but they do not predict them. Some examples are unemployment, corporate profits and labor cost per unit of output. Interest rates are another good lagging indicator; rates change after severe market changes.

2. An example of a lagging indicator is a moving average crossover, because it occurs after a certain price move has already happened. Technical traders use a short-term average crossing above a long-term average as confirmation when placing buy orders since it suggests an increase in momentum. The drawback of using this method is that a significant move may have already occurred, resulting in the trader entering a position too late.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth ...
  3. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
  4. Building Permits

    A type of authorization that must be granted by a government ...
  5. Cyclical Unemployment

    A factor of overall unemployment that relates to the cyclical ...
  6. Crossover

    The point on a stock chart when a security and an indicator intersect. ...
RELATED FAQS
  1. Are exponential moving averages more effective than simple or weighted moving averages?

    An exponential moving average (EMA) uses an exponentially weighted multiplier to give more weight to recent prices, which ... Read Full Answer >>
  2. What are the main differences between momentum and trend?

    Though they may initially appear similar, real differences exist between the concepts of momentum and trend. They are two ... Read Full Answer >>
  3. How effective is creating trade entries after spotting a Golden Cross pattern?

    The effectiveness of a trading strategy based on the golden cross pattern can vary widely from case to case. The golden cross ... Read Full Answer >>
  4. What are the main drawbacks of a Double Exponential Moving Average -DEMA?

    The most popular form of technical indicator is likely the moving average. Traders and analysts are taught that the "trend ... Read Full Answer >>
  5. How do I create a trading strategy with Bollinger Bands® and moving averages?

    Bollinger Bands are a popular technical volatility indicator. They place upper and lower bounds around the trading ranges ... Read Full Answer >>
  6. What are leading, lagging and coincident indicators? What are they for?

    An indicator is anything that can be used to predict future financial or economic trends. For example, the social and economic ... Read Full Answer >>
Related Articles
  1. Active Trading

    Finding The Trend With Aroon

    Don't be confused about whether a long-term trend will continue, stall or reverse.
  2. Mutual Funds & ETFs

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  3. Economics

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  4. Active Trading

    Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  5. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  6. Forex Education

    A Trader's Guide To Using Fractals

    This reversal pattern can make sense of the seeming randomness of market movements and improve your trading.
  7. Chart Advisor

    Watch These Stocks for a Breakout

    These stocks are are tight and will eventually breakout out. Here ways to trade them.
  8. Economics

    What Part of the Money Supply is M2?

    M2 is the part of the money supply economists use to analyze and predict inflation.
  9. Economics

    Understanding Structural Unemployment

    Structural unemployment is an economic miss-match where workers fail to find jobs and employers with available jobs fail to find workers.
  10. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center