Lagging Indicator

Dictionary Says

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 Says

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.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Business Cycle

    The recurring ...
  2. Coincident Indicator

    A metric which ...
  3. Cyclical Unemployment

    A factor of ...
  4. Building Permits

    A type of ...
  5. Leading Indicator

    A measurable ...
  6. Chikou Span

    A component of ...
  7. Relative Strength Index - RSI

    A technical ...
  8. Structural Unemployment

    Unemployment ...
  9. Crossover

    The point on a ...
  10. Moving Average - MA

    An indicator ...

Articles Of Interest

  1. Exploring Oscillators and Indicators: Leading And Lagging Indicators

    Create buy-and-sell signals to identify market trends.
  2. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  3. Using Coincident And Lagging Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  4. Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  5. Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  6. Economic Indicators: Consumer Credit Report

    The Consumer Credit Report is a good lagging indicator, especially when examined in conjunction with personal wage growth and interest rates.
  7. A Trader's Guide To Using Fractals

    This reversal pattern can make sense of the seeming randomness of market movements and improve your trading.
  8. Finding The Trend With Aroon

    Don't be confused about whether a long-term trend will continue, stall or reverse.
  9. Moving Averages: How To Use Them

    We''ll show you how technical analysts use moving averages to identify trends and reversals.
  10. What are leading, lagging and coincident indicators? What are they for?


comments powered by Disqus
Recommended
Loading, please wait...
Trading Center