Lagging Indicator
Candlefocus EditorLagging indicators allow traders to measure the strength or weakness of a trend. If the price action displays a prolonged period of trading within a certain range, the lagging indicators can be used to confirm the direction of the trend or whether it is losing momentum. Lagging indicators are typically used in combination with other indicators, such as support and resistance levels, Fibonacci retracements, and oscillators such as the relative strength index.
In addition to being used in technical analysis, lagging indicators in business are often used to measure the performance of an organization. In business, lagging indicators can include the sales of a product or service, customer satisfaction, and company profits. These along with leading economic indicators, such as consumer confidence and employment levels, provide a comprehensive snapshot of an organization's health.
Although lagging indicators are often used to make informed decisions about investing, trading, and processes, they are backward-looking and will only provide insight into what has already occurred in the market or business. For example, looking at the unemployment rate to confirm a recession only confirms that the recession has already occurred, rather than providing insight into where the economy is headed. Therefore, it is important to incorporate leading indicators as well as lagging indicators to gain a better understanding of what may be ahead.