In the previous grade, we talked about some of the most popular chart indicators.
You’ve already learned about several tools that can help you spot trending and range-bound trade opportunities.
Still hanging in there? Great! Let’s keep going — welcome to Grade 6!
In this lesson, we’re going to help you simplify how you use chart indicators.
The goal? To help you understand what each tool does best (and where it might let you down), so you can decide which ones suit your trading style — and which ones don’t.
Let’s start with a key concept:
There are two main types of indicators you’ll come across:
1. Leading Indicators
These give signals before a new trend or reversal happens.
In other words, they try to predict what’s going to happen next.
They often work by showing when a currency pair is overbought or oversold, assuming prices will reverse soon after.
For example, if something is oversold, a leading indicator might suggest a bounce is coming.
Sounds amazing, right? You might be thinking:
“Yes! I’ll jump in early and catch the entire trend!”
That would be perfect… if the signals were always accurate. But unfortunately, they’re not.
Leading indicators are known for giving false signals, or fakeouts.
They can easily “mislead” you — get it? Lead you the wrong way? 😄
2. Lagging Indicators
These don’t try to predict trends — they confirm them after they’ve already started.
They basically say:
“Hey, just letting you know — the trend is already happening. Better late than never!”
Lagging indicators are more reliable in strong, long-lasting trends.
The downside? By the time you get the signal, a good chunk of the move might already be over.
It’s like showing up to a party after most of the fun is done…
Or finally buying a flip phone while everyone else is taking selfies on the iPhone 11 Pro.
While lagging indicators may have you enter trades late, they help reduce risk by keeping you aligned with the current trend.
So how do you choose which type to use?
Let’s keep it simple:
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Use leading indicators (oscillators) in sideways or ranging markets.
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Use lagging indicators (trend-following tools) in trending markets.
While you can use both together, just know they might give conflicting signals — so be cautious.
We’re not saying one is better than the other. But understanding their strengths and weaknesses can help you avoid costly mistakes and improve your decision-making.
Let’s move on and explore these indicators in more detail so you can start applying them more effectively.