Leading vs. Lagging Indicators

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We've already covered a lot of tools that can help you analyze potential trending and range bound trade opportunities. Still doing great so far? Awesome! Let's move on.

In this lesson, we're going to streamline your use of these chart indicators.

We want you to fully understand the strengths and weaknesses of each tool, so you'll be able to determine which ones work for you and which ones don't.

Let's discuss some concepts first. There are two types of indicators: leading and lagging.

A leading indicator gives a signal before the new trend or reversal occurs.

A lagging indicator gives a signal after the trend has started and basically informs you "Hey buddy, pay attention, the trend has started and you're missing the boat."

You're probably thinking, "Ooooh, I'm going to get rich with leading indicators!" since you would be able to profit from a new trend right at the start.

You're right.

You would "catch" the entire trend every single time, IF the leading indicator was correct every single time. But it won't be.

When you use leading indicators, you will experience a lot of fakeouts. Leading indicators are notorious for giving bogus signals which could "mislead" you.

Get it? Leading indicators that "mislead" you?

Haha. Man we're so funny we even crack ourselves up.

What is Traded?

The simple answer is MONEY.

Because you're not buying anything physical, this kind of trading can be confusing.

Think of buying a currency as buying a share in a particular country, kinda like buying stocks of a company. The price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy.

When you buy, say, the Japanese yen, you are basically buying a "share" in the Japanese economy. You are betting that the Japanese economy is doing well, and will even get better as time goes. Once you sell those "shares" back to the market, hopefully, you will end up with a profit.

In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy, compared to other countries' economies.

By the time you graduate from this School of Pipsology, you'll be eager to start working with currencies.




Major Currencies

Symbol Country Currency Nickname
USD United States Dollar Buck
EUR Euro zone members Euro Fiber
JPY Japan Yen Yen
GBP Great Britain Pound Cable
CHF Switzerland Franc Swissy
CAD Canada Dollar Loonie
AUD Australia Dollar Aussie
NZD New Zealand Dollar Kiwi
Currency symbols always have three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country's currency.

Take NZD for instance. NZ stands for New Zealand, while D stands for dollar. Easy enough, right?

The currencies included in the chart above are called the "majors" because they are the most widely traded ones.

We'd also like to let you know that "buck" isn't the only nickname for USD.

There's also: greenbacks, bones, benjis, benjamins, cheddar, paper, loot, scrilla, cheese, bread, moolah, dead presidents, and cash money.

So, if you wanted to say, "I have to go to work now."

Instead, you could say, "Yo, I gotta bounce! Gotta make them benjis son!"

Or if you wanted to say, "I have lots of money. Let's go to the shopping mall in the evening."

Instead, why not say, ""Yo, I gots mad scrilla! Let's go rock that mall later."

Did you also know that in Peru, a nickname for the U.S. dollar is Coco, which is a pet name for Jorge (George in Spanish), a reference to the portrait of George Washington on the $1 note?