The indicator giving a buy signal before the new trend or reversal occurs is normally known as a leading indicator. You can experience several counterfeits when you are using Leading indicators. It is good to follow the leading indicators when you are talking about following the trend as the leading indicators predict the final results. But though it has some demerits. Placing a goal on a leading indicator will result in gaming and generate the wrong results. Leading indicator leads to the performance of lag measures; normally measures intermediate processes and activities. An example of the yield indicator is the bond yields. Bond yields are leading indicators of the stock market because on behalf of these bond traders anticipate and further course of the stock market and economy of the country. It requires good leading indicators to assure good results in the FX market. Though, following the trend depends totally on you as you decide on which trend indicator to follow.
Facts for Leading Indicator:-
>> Average speed of answer
>> Average Handle Time
>> First Contact Resolution
>> Number of contacts
An advantage of the leading indicator is it is predictive in nature and helps an organization to make adjustments as per the outcome.
But though, it faces some challenges. It is difficult to identify and capture; often new measure with no history in the organization
Whereas a lagging indicator is the indicator giving you the signal after the trend has stared. It focuses on results at the end of time period, normally characterizing historical performance. But when it comes to using lagging indicator, which isn’t as flat as fake results give you signals after the change in trend of price formation. The sad part about is you’d be a bit late when you are wishing to enter a position. But because of this so-called a bit late, you are losing your big profits. An example of lagging indicator is unemployment rate of the country. Another example is media as it is an economic indicator for the news is always reported few hours before the actual economic fluctuation that they point to. A lagging indicator is greatly important because of its ability to confirm that a pattern is happening or about to occur. To determine the quality of maintenance and reliability process, the results of each process need to be measured using lagging indicators.
Facts for Lagging Indicators:-
>> Total customer contacts
>> Total incidents
>> Total problems
Like leading indicator it also faces challenges. It is quite historical in nature and does not reveal current activities.
When it comes to performance of lagging indicators, delivering lagging indicators means that the business has a good idea of how well it has done, but reveals little about whether a direction is working. So, not only is it wasting a Manager’s time to be looking at reports that are only showing a historical position, but, more
Importantly, it is squandering the opportunity to gain a competitive advantage.