Lagging Indicator

What is a 'Lagging Indicator'

A lagging indicator is 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.

BREAKING DOWN '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. Recognition Lag

    The time lag between when an actual economic shock, such as sudden ...
  2. Response Lag

    The time lag between when a corrective action is taken in the ...
  3. Confirmation

    The use of an additional indicator or indicators to substantiate ...
  4. Confirmation On A Chart

    An indicator or chart pattern that provides evidence that the ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy ...
  6. Implementation Lag

    The time lag between when a macroeconomic shock or other adverse ...
Related Articles
  1. Insurance

    Exploring Oscillators and Indicators: Leading And Lagging Indicators

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com Indicators can be separated into two main types - leading and lagging - both differing in what they show users. Leading ...
  2. Professionals

    Economic Indicators

    FINRA Series 6 Exam Study Guide - Economic Indicators. This section deals with economic indicators: leading indicators, lagging indicators and coincident indicators.
  3. Professionals

    Economic Indicators

    There are various economic activities that one can look at to try to identify where the economy is in the business cycle. An individual can also use these economic indicators as a way to try ...
  4. Active Trading

    Moving Averages: Factors To Consider

    By Casey Murphy, Senior Analyst ChartAdvisor.com Data Used in Calculation Most moving averages take the closing prices of a given asset and factor them into the calculation. We thought it would ...
  5. Insurance

    Exploring Oscillators and Indicators: Conclusion

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The goal of every short-term trader is to determine the direction of a given asset's momentum and to attempt to profit from ...
  6. Markets

    Conference Board: Composite Index Of Lagging Indicators

    By Chris Stone Contact Chris The third component of the Business Cycle Indicators (BCI) is the Composite Index of Lagging Indicators. This rarely cited but useful index is the final confirmation ...
  7. Forex

    Moving Average Flavors

    Get a better understanding of moving averages in this walkthrough.
  8. Technical Indicators

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  9. Technical Indicators

    Tackling Technicals For Beginners

    Choosing the right indicators can be a daunting task for novice traders. It’s a much easier process when they focus their effects into five categories.
  10. Options & Futures

    Trading Around Key Options Indicators

    Learn the key economic indicators to help predict market movement.
RELATED FAQS
  1. 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 Answer >>
  2. What are the best technical indicators to complement the Force Index?

    Find out which technical tools pair best with the Force Index to generate and confirm trading signals, such as lagging indicators ... Read Answer >>
  3. What technical indicators can be used to confirm the tendency of a stock?

    Find out what signal confirmation is and some common strategies used to confirm trading signals concerning the tendency of ... Read Answer >>
  4. How are moving averages used in trading?

    Moving averages are very popular tools used by technical traders to measure momentum. The main purpose of these averages ... Read Answer >>
  5. What is a common strategy traders implement when using the Moving Average (MA)?

    Learn about a basic moving average strategy predicated on the relationship between a security's price action and its moving ... Read Answer >>
  6. What are the best technical indicators that complement the Relative Strength Index ...

    Learn some of the best additional technical indicators that can be used along with the relative strength index to anticipate ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center