The Best Leading Indicator



Many say there’s no such thing as a leading indicator. They even take pride is saying they only use pure price action and volume.

I’m not sure why they think that’s so impressive:

  • They say that all indicators are lagging and that they only plot what’s already been done in the market … and that’s true.
    • But that’s also true of price action.
    • And that’s also true of volume.

So what is the leading indicator and why is it a leading indicator of what the market is likely to do in the future?

The answer: Momentum is a leading indicator.

  • Here’s why: Not magical, but mathematical.
  • Example of you walking North (you could turn around and go South in one footstep) vs train going north (because of its momentum, it can’t turn around in the distance of one human foot step)
  • In Chicago Floor example.

What IS momentum?

  • Velocity times mass.
  • Speed of orders and volume of those orders.
    • But volume of individual orders to find the whales.

Is momentum always a leading indicator?

  • No, nothing is, and so there are certain signals called “momentum shift signals” that are the only times we have a high probability indication of what the market will do in the future.
  • Many momentum indicators to choose from.
  • Email me at barry@topdogtrading.com and ask for my Cycle Indicator. Make sure you mention that you heard about this on the podcast.
    • I’ll get that info to you for free:
      • Live webinar
      • Video
        • Depending one when you’re listening to this.

 


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