Top 5 Non-Lagging Indicators for Crypto Trading - Phemex Academy (2024)

Non-lagging indicators are technical indicators that predict price movement in real-time. Indicators help crypto traders identify the core components of market research: Trend, relative strength, volume, divergence, and momentum. In this guide we’re going to cover the top 5 most effective non-lagging indicators that allow traders to make profitable trades by combining all core research aspects.

Lagging vs. Non-lagging Indicators

The difference between lagging indicators and non-lagging indicators is that the former are slower and provide trade signals with a delay while the latter are faster and provide signals as they’re developing. Lagging indicators are slower, but their data is derived from a longer period which increases accuracy for traders. Non-lagging indicators have the advantage of speed, but they can send false signals.

The top five best non-lagging indicators featured below work for Bitcoin (BTC), Ethereum (ETH), and all other altcoins. Once you’ve added these non-lagging indicators to your trading strategy, you can begin inputting custom settings and adjusting them to your trading style.

Beginner? To get started, follow this step-by-step guide:

1) Register an account. Get a free account at Phemex and enjoy a welcome bonus.

2) Start practicing. Use the testnet to paper trade with simulated money for free.

3) Deposit crypto. To start trading with real money, deposit crypto in your wallet.

Bonus: Read more about spot tradingand contract tradingon the Phemex platform.

Summary:

• Technical indicators help traders make profitable trades by presenting information about the trend, strength, volume, momentum, and other metrics.
• There are two types of technical indicators: “Lagging” and “non-lagging”. Non-lagging indicators are also known as “Leading” indicators.
• Lagging indicators provide data after a trend is confirmed, while non-lagging indicators provide data in real-time as the trend occurs.
• Most technical indicators are lagging indicators. This does not make them less effective, as they’re based on long-term data.
• The advantage of non-lagging indicators is that they’re faster, but the disadvantage is that they can provide false signals.
• A trader building a trade strategy can use a combination of lagging and non-lagging indicators to maximize their profit potential.
• The top five non-lagging indicators for beginners are the True Strength Index (TSI), Fisher Transform (FT), Pivot Points (PP), Stochastic RSI (StochRSI), and Williams Alligator (WA).
• Non-lagging and lagging indicators can be implemented on 200+ Phemex spot trading and futures trading

What Are Lagging Indicators?

Lagging indicators send signals after the trend is confirmed. Most indicators such as the moving average (MA) and Relative Strength Index (RSI) are lagging indicators. The best example of a lagging indicator is the Zig Zag (ZZ) indicator that identifies bullish and bearishtrends after they’re confirmed. A trader can’t act on this information, but they can predict the current trend based on historic patterns:

However, lagging indicators can serve as leading indicators. For example, the Relative Strength Index can serve as a leading indicator once the oscillator reaches the upper or lower range extremes. If the RSI oscillator reaches the upper “overbought” boundary, but reversesto the downside, this is a bearish signal and a trader can open a short trade. Lagging indicators often serve as leading indicators for divergencetrading.

What Are Non-Lagging Indicators?

A non lagging trend indicator provides trade signals in real-time. Non lagging indicators commonly rely on crossover linesto indicate a trend reversal. For example, the Williams Alligator (WA) indicator uses line contraction and expansion to signal a trending market:

The WA indicator sends real-time signals as the trend is forming based on line movement. If the lines contract, traders know it’s a sideways/choppymarket. If the bands expand and diverge from each other, traders know it’s a trendingmarket. The former is known as a “sleeping” alligator and the latter is known as an “awoken” alligator.

Top 5 Non-Lagging Indicators For Crypto Trading

We handpicked the best leading indicators that can be used for crypto trading. These indicators are based on price averages, volume, and other reliable metrics. Traders can combine them with other indicators or use them in isolation. With that said, let’s delve into our top five non-lagging indicators picks:

1 True Strength Index (TSI)

The True Strength Index (TSI) is an indicator that does it all: trend, overbought/oversold levels, cross trading, and divergence. The TSI indicator is a non lag trix indicator based on three Exponential Moving Averages (EMAs) – the most important moving average for leading signals.

The EMA places weight on recent price data and sends buy and sell signals once the EMA lines cross and diverge. The formula uses smoothening (multiple time values) to make it less volatile and sends accurate signals for traders. Here’s how the TSI indicator can be used for Bitcoin trade signals:

The crossing of EMA lines sends buy and sell signals – once the blue line (25-EMA) ascends above the red line (13-EMA) this is a buy signal and vice versa. We can see how when the lines diverged from each other, this was reflected in the price of Bitcoin. The indicator was accurate for virtually all of the latest trends on the chart.

2 Fisher Transform (FT)

The Fisher Transform (FT) is a leading indicator comprised of two lines: “Fisher” and “Trigger”. The indicator is used for leading buy/sell signals and is based on the Gaussian distribution which is a mathematical formula for continuous probability. The indicator is range-bound similar to the RSI indicator, indicating overbought values on the upper range and oversold on the lower range. The Fisher Transform moves fast and provides signals once the two lines cross:

If the Fisher (blue) line crosses over the Trigger (orange) line, this indicates a bullish trend and a buy signal. If the Trigger line crosses the Fisher line, this indicates a bearish trend or sell signal. If a trader zooms out of the chart, they can analyze the market trend based on the range. If the oscillator is trending in the upper levels, it can be used for divergence trading by trading against the market.

3 Pivot Points (PP)

The Pivot Points (PP) is a leading indicator that’s used for day trading. Pivot Points are based on yellow lines that surround the candles to indicate support and resistance levels. The “S” stands for “Support” and “R” stands for “Resistance”. Support levels are where traders place buy wallsand the price is likely to hold. Resistance levels are where traders place sell wallsand the price is likely to collapse. A trader can long Bitcoin if it trades at the bottom of the “S” levels or short Bitcoin if it trades at the top of the “R” levels:

Pivot Points are purely based on price averages and disregard volumeor momentum. The indicator uses low, high, and closing price averages to construct the pivot lines. This makes it an active leading indicator that’s suitable for automated bot trading. Traders can use stop-lossesnear the S levels and take-profit orders near the R levels. The indicator is most commonly used for confirming trend patterns.

4 Stochastic RSI (StochRSI)

Stochastic RSI (StochRSI) is a leading non lag reversal indicator that oscillates faster than the Relative Strength Index (RSI). StochRSI is based on market momentum and assumes it’s more important than volume or price. The indicator is highly sensitive and oscillates between overbought and oversold territory fast. Readouts over >80 are considered “overbought” and under 20< are considered “oversold”:

Once the “K” line (blue) surpasses the “D” line (red) – open a long trade and vice versa. Traders who use the StochRSI indicator for divergence tradingare betting against the market. If the market is mostly selling Bitcoin, a trader can analyze oversold levels and open a long trade preemptively expecting a price reversal. However, they should be careful as the indicator can send false signals due to its sensitive nature.

5 Williams Alligator (WA)

The Williams Alligator is a non lag MA indicator and our first recommendation on the list. The WA indicator does two things: it tells traders how to trade and when to trade. The reason this is the best non-lagging indicator is that it filters sideways markets from trending markets and simultaneously sends buy & sell signals.

It was designed to mimic the opening of an alligator mouth. A closed mouth is when the lines are close to each other and an open mouth is when the lines separate out. If the mouth is open, this indicates a trending market. If the mouth is closed this indicates a sideways market and a trader should avoid trading:

A buy signal is generated when the lips (green line) moves above the red and blue line. A sell signal is generated when the jaw (blue line) moves above the red and green line. In the example above we see two trending markets and the indicator predicted both at the right time. The lines are separated in both, indicating a trending market. WA is based on a triple Simple Moving Average (SMA) which makes it one of the most accurate indicators to date.

Conclusion

Lagging indicators are more accurate while non lagging are superior for day trading. Fundamental tradersshould use lagging indicators because they’re more reliable for long-term investing and they measure values based on historic data. Leading indicators place weight on recent prices and they can predict the next trends while they’re occurring. Future trends are self-fulfilling prophecies in a way because traders use the same indicators and place similar trades.

The bottom line is that it’s not about lagging vs non lagging indicators, but it’s how we use those indicators in our trades. The interpretation one trader has of an indicator can be wildly different from another trader, and this reflects in their PnL. It’s recommended to use these indicators in conjunction to confirm trends before making risky trades. Use safety mechanisms such as stop-lossesto minimize the risk of capital loss. To learn more about trading indicators in detail, visit our technical analysis (TA) section.