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Leading Indicator Meaning

A measurable economic or technical factor that changes before the market starts to follow a particular pattern or trend. In traditional finance, "Consumer Confidence" or "Building Permits" are leading indicators of economic growth.

In crypto, "Exchange Inflow/Outflow" or "Social Media Sentiment" are often seen as leading indicators. Traders use leading indicators to "get ahead" of a move.

For example, if a large amount of Bitcoin is moved from private wallets onto exchanges (an inflow), it is a leading indicator that a large sell-off might be coming. If "Google Trends" searches for "Bitcoin" spike, it is often a leading indicator of an incoming wave of retail buyers.

While powerful, leading indicators can be "noisy" and provide "false signals." Just because a whale moves Bitcoin to an exchange doesn't mean they will sell it; they might just be moving it to use as collateral for a different trade. Therefore, professional traders rarely rely on a single leading indicator, instead using them as "clues" to build a broader market thesis.

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