Leading technical indicators are used by traders to try and predict future price movements. They aim to identify potential trend reversals before they happen, giving traders a chance to enter or exit a trade before the price changes. However, they can also generate false signals, so it's important to use them in conjunction with other technical analysis tools.
One example of a leading technical indicator is the Relative Strength Index (RSI), which measures the strength of a security's price action by comparing upward and downward price movements over a specified period of time. The RSI oscillates between 0 and 100, with readings above 70 indicating overbought conditions and readings below 30 indicating oversold conditions.
Another example is the Moving Average Convergence Divergence (MACD) indicator, which uses moving averages to identify changes in momentum and potential trend reversals. It is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA, and then plotting a 9-day EMA on top of the MACD line. When the MACD line crosses above the signal line, it is considered a bullish signal, and when it crosses below the signal line, it is considered a bearish signal.
The Ichimoku Cloud is another leading technical indicator that uses multiple lines to identify potential trend changes. It consists of five lines, including the Conversion Line, the Base Line, the Leading Span A, the Leading Span B, and the Lagging Span. The intersection of these lines can signal potential trend reversals, and the cloud created by the Leading Span A and Leading Span B can indicate support and resistance levels.