05 Moving Average Convergence and Divergence
The Moving Average Convergence and Divergence (MACD) indicator is a lagging indicator that calculates the connection between different exponential moving averages EMA.
06 Benefits of using lagging indicators
The use of lagging indicators is often beneficial to novice traders who are new to the market. The benefits listed below can help traders understand when to use these lagging indicators:
Due to the lag of indicators, traders need to get further confirmation based on more transaction data. In other words, lagging indicators will force traders to wait for a while before entering the market.
You can confirm the timing of entry and exit.
In a market with strong trend performance, lagging indicators are very useful.
The following USD/JPY weekly chart introduces how to use MACD crossover as a trading strategy. When the MACD line (blue line) crosses the red signal line, the market entry signal appears. Due to the lag of the MACD indicator, at first traders gave up entering the market when the price trend between point A and point B changed (the MACD line in the figure just crossed the signal line), and then the entry transaction was set to maximize the spread, namely the price Go from point B to the shock low. As the example shows, even if the trader gives up some of the potential gains before entering the market, the overall strategy is still successful.
07 Summary of lagging indicators
Lagging indicators are a good tool for market transactions. They can be used flexibly to improve your trading strategy or provide more support for traders' analysis. These indicators are very useful tools, they are worth learning and can penetrate every trader's strategy well.