Leading Indicator
An indicator claimed to change before price does, usually built from the rate of change rather than the level of price.
How it is identified
Test: the indicator's construction emphasises the most recent periods so that it turns before a smoothed measure would
Unit
qualitative
In depth
The label is misleading: no indicator computed from past prices can contain information about the future, so a leading indicator is one that turns earlier relative to a lagging one, not one that anticipates the market. Turning earlier necessarily means signalling more often, and most extra signals are false — the trade-off between earliness and reliability is unavoidable and cannot be optimised away. Oscillators such as RSI and stochastics are conventionally placed in this group. Nothing in this dictionary suggests any indicator forecasts a price move.
Worked example
An oscillator turns down while price makes a new high, six sessions before price falls. Across a hundred instances it also turned down before continued advances on sixty occasions — the earliness is real, the reliability is the question.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Leading Indicator” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.