When most traders start out trading they often only look at Leading Indicators as these are the ones that provide the buy and sell signals. So it is not completely impossible to comprehend why that is the case. But no Technical Indicator by itself is profitable over a longer period of time. It is important to combine Technical Indicators together not inside the categories but across the categories. Yes, sometimes two Leading Indicators can be useful but it is when a Leading Indicator is combined with a Lagging Indicator that the usefulness comes into play.
As previously mentioned in our last lesson Lagging Indicators are great for filtering out noise and weed out bad signals let us focus on the stronger signals. Now we need an indicator that gives us those exact signals. One Technical Indicator that is very popular and widely used is the Stochastic. It tells the trader when price is overbought and oversold. It also provides entry signals when the Stochastic Line crosses back below 80, which is overbought level, and when it crosses back above 20, which is oversold.
So the trader would first use the Lagging Indicator before using the Leading Indicator for precise entry. Only when using Leading Indicators the trader would be presented with too many signals and often resulting in a loss. Do not get fooled by the word Leading Indicators and base your entire trading strategy on those Technical Indicators.
In our next lesson we will look at how traders use Confirming Indicators.