Why Indicators Lag

One day, one twentieth of a vote

Indicators lag because each one is an average of the last so many days, and an average answers for all of them at once. Take gold on 23 April 2025. The twenty-day average is made of the last twenty closes; each day one close leaves and one arrives, and the average moves by their difference divided by twenty. On 23 April the close fell 93 dollars from the day before, to 3287.82. But the close it replaced, from 25 March, was 3019.55, 268 dollars lower, so the average rose by 13.41. Today's close is one twentieth of the vote, and the other nineteen are old news.

A train on a bend

Picture a train on a bend. The engine is today's price, and it has already turned down the hill. The carriages are the older closes, and they are still on the straight, because that is where the price was on their days. An average is the middle of the whole train, so it sits back among the carriages and reaches the bend only when enough of them have come round. A longer train, a longer average, is a longer wait. That is all the lag is.

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