What is the difference between advanced and delayed indicators?
Many traders ask me this. They want a quick and easy answer so they know which indicators to pay attention to.
Sorry, but there is no easy answer here.
But I can tell you that just looking at one indicator is committing suicide. Have you ever hit a road with just a gas pedal? Of course not. You need a steering wheel, brakes, mirrors, seat belt, etc.
The trade is the same. You need to diversify the indicators you use. They all have a different purpose. And when you put it all together, you get a more accurate picture of the market.
So how do you diversify?
Fortunately, there are many ways to classify indicators for technical analysis. An easy way is to identify if an indicator is leading or lagging behind. A combination of the two can help traders stay safe and do only the best trades.
How many indicators you use is your choice. But don’t delay your education just by learning one or two. This is preparing for failure.
Today, discover the two types of indicators. You can then apply this knowledge to your future trading plan. It is about developing a solid educational foundation.
Forward and backward indicators: What is the difference?
The best traders I know look at several indicators before making a trade. There are many indicators. Part of your job is to choose the right ones for you and your strategy.
When I started, I tried hundreds of different combinations. It is hard work and time consuming.
I reduced it to seven indicators that make up the Sykes scrolling scale. (More info soon.) I teach all my students to use. But feel free to change it. What works for me may not work for you.
The key is to study hard enough to find your sweet spot. Too few indicators and trade blindly … Too many and you will analyze too much.
Find the ones that work best for you. You can start by testing a combination of advanced and backward indicators. Most indicators fall into one of these categories.
Clear the crystal ball … Traders use them to try to predict the future.
Think of it this way: directing means being in front. These indicators use current market data to guess what a stock might do next.
Don’t get too excited.
The data is constantly changing. Therefore, these indicators are likely to send false signals from time to time.
If they worked perfectly, millionaires would be a dime. The reality is that the vast majority of traders lose. Therefore, using more than one main indicator can help you get a clearer picture.
Another great way to use leading indicators for safe operations is to pair them with …
These focus on previous market data.
You might be thinking, “Tim, why would you want to know where the stocks have been? I can’t negotiate in the past. “
You are right. But studying the past can help traders make better decisions about the trend.
Have you ever heard the phrase “past performance is not indicative of future results?”
I agree with the feeling. Just because a stock has run before doesn’t mean it will work again. But you can. In the land of pennies I have seen how the same stocks increased again and again with the same patterns.
Sometimes it makes me feel like I’m taking crazy pills …
For over 20 years I have been trading the same configurations with the same incomplete stocks. They are not always identical. But my experience helps me notice when a stock starts behaving in a familiar way. That’s when I pay attention.
Seeing the indicators is only part of the equation … You have to know how to use them.
How forward and backward indicators are used when trading
It’s about making your guess more polite. You need to start operations safely and recognize when you need to leave.
Some people treat the market like a slot machine. This is not play! This is the wrong attitude.
Always have a strategy when you enter a trade and keep things in perspective. Use advanced and delayed indicators to help you do this.
And you know that even the best traders get it wrong sometimes. It happens. Get used to losing. All due diligence in the world will not save you from a badly done trade.
Stubborn traders don’t last long. One of two things happens: they either learn to make small losses or they blow up their accounts.
I’ve seen it happen too many times. Some beginners are lucky several times and then start counting on unrealized profits. Usually, that’s when the market humiliates them.
Don’t be so new.
Let’s go through the Sykes scroll scale as an example. I will tell you which of my indicators are the main ones and which ones are delayed. If you are unfamiliar with the scale, take a second to study it.
(Professional Tip: You can learn the Sykes scrolling scale on my “Trader Checklist Part Deux” DVD.)
Examples of main indicators
Before entering a trade, I always check my risk / reward ratio. How much money am I risking? Are the potential benefits worth the risk?
This is a leading indicator because I am trying to predict the future of trade. If the trade goes wrong, how much will I lose? And, if it goes well, how much could we earn?
Then I check how easy it is to get in and out of trading or liquidity. This indicator is both advanced and backward, but I will explain the main aspect first.
Level 2 shows me instantly how many stocks are available to trade. If there aren’t enough stocks to buy, I’ll stay in my hands. I hate getting stuck in illiquid stock. If it’s hard to open my position, it’ll probably be hard to get out of it too.
I never trade without level 2. It is an important part of my daily strategy.
Another indicator I see is time: specifically the time of day and my personal schedule.
The hottest market hours are open and closed. I don’t usually exchange at noon. By not negotiating around noon, I am predicting that there will be no play worth watching. Nor will I engage in a trade if I have a very busy schedule. So my prediction is that I won’t have enough time to negotiate.
The last main indicator I check is why actions move. What is the catalyst? Some types of news can increase stocks higher than others. It is important to understand why an action moves to keep your expectations realistic.
Examples of delay indicators
The most obvious indicator of delay is the pattern and price of the shares. Where was the price in the past? Does he seem to follow a pattern? I look at stock charts to confirm trends and recognize strategies.
Remember how I said ease of entry and exit is both a forward and backward indicator?
Therefore, it is important to exchange liquid stocks. You don’t want the merchant to buy 50% of the float. Getting out of this position would be a nightmare. Pay attention to trading volume, market cap and pending actions. They help determine the liquidity of stocks.
Past performance and climb history is another obvious indicator of lag. It’s basically in the name. If the stock has a history of volatility, it may become volatile again.
Lastly, I always pay attention to the market in general. Three out of four shares follow the global market. Therefore, if the market increases, there will be more chances that the shares will increase. If the market falls, I’m more careful to make it long.
Is the stock market a leading or lagging indicator?
Pssst … see the previous section. Seeing the stock market as a whole is a good way to make transactions better informed.
It is more difficult for stocks to rise in bearish markets.
That’s why bullish markets are the favorites of fans. Unless you are a short seller.
I haven’t had much left since I started teaching students how to trade. I noticed that short selling is harder to learn for novices. It is certainly more risky and is currently a crowded niche.
Some of my students have a short performance. Take Tim Lento for example. It will earn $ 1 million in commercial profits mainly from shortenings. *
Maybe the short is for you. That’s all right. Learn as much as you can about short and long positions before deciding what works best.
Best forward and backward indicators for daily trading
Be wary of anyone who tells you they have a perfect trading system. They are lying. The market is unpredictable and intrinsically risky.
It all comes down to what works for you. I teach the Sykes commute scale to my students because I use it for two decades to make profits safely.
But my way is not the only way. My best advice is to learn what other marketers do successfully. For me, the best marketers refine their strategies based on what works for them. They have their own rules to follow.
Practice by observing how the indicators react with different actions. Look for patterns.
Don’t forget to always check your strategy before making a trade.
Conclusion of advanced and backward indicators
It would be nice if you only had to look at one indicator. But you’re kidding if you think this will work.
The stock market is a risky place where only the most prepared and disciplined survive. Technical analysis can help traders make better decisions …
Several indicators can help you see the overview. Therefore, it matters which indicators you use. And the right ones for you will depend on the strategy you build. Try to diversify them to see the market from different angles.
Sorting them forward and backward is just one way to do it. But it’s a good start.
Feel free to use the Sykes scroll ladder, but know that it is not a foolproof system. Trade is not an exact science. It is up to you to find out what works in your favor.
If I don’t use an indicator you like, that’s fine. We are all different and we could operate differently. We must not pay attention to the same indicators. That is its beauty.
For more information on how I use indicators for daily stock trading, request my negotiation challenge. I don’t accept everyone. You have to show that you are ready to do the job. But it’s where all my student millionaires studied for years. And now you have the opportunity to learn from them and me.
Start studying today!
I want to know what you think! What forward and backward indicators do you use to trade? Comment below. I love hearing from you.
Exemptions from liability
* Note that these types of business results are not typical. Most traders lose money. It takes years of dedication, work and discipline to learn to trade. Individual results will vary. Trade is intrinsically risky. Before you make trades, remember to do your due diligence and never risk more than you can afford to lose.
** Please note that my results are far from typical. Individual results will vary. Most traders lose money. I have the advantage of years of work, dedication and experience. Trade is intrinsically risky. Do your due diligence and never risk more than you can lose.