Leading indicators
Indicators that attempt to signal a move before it happens.
Full explanation
Leading tools such as oscillators, sentiment readings and volatility compression measures try to warn you early — that momentum is fading, or that a market is stretched.
They are early by design, which means they are wrong more often. An oscillator can read overbought for a whole trending session while price keeps rising.
Used well, a leading indicator prepares you to look for a setup. It is a heads-up, not an entry.
Why traders watch it
Knowing an indicator is leading sets your expectation for its accuracy, which stops you treating an early warning as a trade signal.
Trading considerations
- Never enter on a leading signal alone — wait for price confirmation.
- Overbought and oversold readings are unreliable in strong trends.
- Use one leading tool at most; stacking them adds noise, not information.
Educational guidance only — never a trading signal or recommendation.
Related indicators
ATR (Average True Range)
ATR, or Average True Range, measures the average distance a market travels over a chosen number of periods, including gaps. It is a pure volatility reading with no directional bias. Traders use ATR to set stop distances that respect normal noise, to size positions consistently, and to judge whether current conditions are unusually quiet or unusually fast.
Bearish candle
A candle that closes below its open — sellers finished the period in control.
Bollinger Bands
Bollinger Bands are a volatility indicator made up of a moving average with upper and lower bands that expand and contract as market volatility changes. They help traders judge whether price is becoming stretched, identify volatility changes, and support both trend-following and mean reversion analysis.
Breakout
A breakout occurs when price moves decisively beyond a defined level such as a range high, trendline or consolidation boundary. It signals that the balance between buyers and sellers has shifted and can start a sustained move. Breakouts also fail often, so traders look for confirmation through follow-through, expanding range and a successful retest of the broken level.
Bullish candle
A candle that closes above its open — buyers finished the period in control.
Candle
A single bar on a candlestick chart showing the open, high, low and close for one period.