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Most technical analysis indicators are lagging indicators (will indicate a buy after the opportunity to buy has happened), there are also co-incident indicators that suggest a buy opportunity is occurring, but it is alleged that there are leading indicators that suggest a buy opportunity will occur.

Examples of Lagging Indicators.

  • Moving averages - weighted or simple
  • Bollinger bands
  • Relative Strength (thx to @Jasper)

Example of possible Co-Incident Indicators

Example of possible Leading Indicators

  • On-balance volume indicator (OBV).

Does anyone have any experience in utilising these or other co-incident or leading indicators and have done some testing on them?

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    If anyone had a reliable leading indicator, we'd know it -- they'd get rich fast. There may be unreliable indicators which are still better than nothing, and the technical analysis fans will be glad to tell you about which have seemed to help them.
    – keshlam
    Commented Apr 27, 2016 at 16:01
  • I guess an unreliable leading indicator that then can be used with other technical analysis tools for sanity checking is the sort of thing I'm getting at.
    – Marcus D
    Commented Apr 27, 2016 at 16:04

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Relative Strength Indicators are also trailing indicators. They are based on the number of recent upticks or downticks in an investment's price. (The size of a tick is quantized, and related to the investment's price.) By the time enough upticks have accumulated to generate a buy signal, the investment has already increased in price significantly. Similarly, by the time enough downticks have accumulated a to generate a sell signal, the investment has already dropped in price significantly.

The theory of Relative Strength Indicators is based on the hope that moves found by these indicators are likely to continue after the signal is generated. But even if this is the case, someone who relies on these indicators will miss out on the first part of the move.

Dorsey-Wright offers investment research based on the theory of Relative Strength Indicators. They offer investment vehicles based on this research. They also work with local investment advisors to develop custom back-tested strategies. They have published a white-paper, with references to others' research.

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  • +1 The RSI that I refer to (I have added a link) is different to the one you refer to (investopedia.com/terms/r/…), but your paper that you provided is very interesting Thank you! It appeals to my inner "data scientist"!
    – Marcus D
    Commented May 7, 2016 at 15:54
  • +1 for paragraph two. Technical analysis indicators are a just reflection of past price and/or volume movement and they predict absolutely nothing going forward. It's the same as looking in the rear view mirror to see where you have been.
    – Bob Baerker
    Commented Sep 2, 2021 at 16:55

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