RSI started from a relatively median level, around 50. The subsequent flat price action in the stock also produced relatively flat price action in the indicator and it remains around 50. Benefits and Drawbacks of Leading Indicators There are clearly many benefits to using leading indicators. Early signalling for entry and exit is the main benefit. Leading indicators generate more signals and allow more opportunities to trade.
Early signals can also act to forewarn against a potential strength or weakness.
Because they generate more signals, leading indicators are best used in trading markets. These indicators can be used in trending markets, but usually with the major trend, not against it. In a market trending up, the best use is to help identify oversold conditions for buying opportunities. In a market that is trending down, leading indicators can help identify overbought situations for selling opportunities. With early signals comes the prospect of higher returns and with higher returns comes the reality of greater risk.