Ideas for Struggling Traders Trading Noise

Discussion in 'Trading' started by TraderZz, Jan 22, 2012.

  1. Do not trade noise.

    Noise can be defined as the ratio of the range of one timeframe / the ratio of the range of another.

    When the ratio is high/low averaged over an interval, it will tell you all you need to know.
  2. i like this...

    your 2nd statement..can you give a real world example?
  3. Sounds like it might be more of a trendiness indicator. A chart might better explain it.
  4. sheda


  5. Interesting observation. It would explain why certain time frames show usable trends while others are noise.

    Expounding further, one type of range system to harness the noise is just a trend system on a shorter time frame.

  6. oraclewizard77

    oraclewizard77 Moderator

    Also, lets assume that you trade for example a future that is open during most time frames.

    During say market hours, the bid / ask can be 1 tick apart, but during after hours the bid / ask can be 3 or greater ticks apart.

    This means you are paying $ 30 cost to trade after hours. Even worse, let's say you get stopped out on your trade. During normal hours your stop should function correctly getting you out with no slippage to at most 1 tick of slippage, but you could get stopped out due to low volume after hours with an extra 4 ticks of slippage on top of the bad bid / ask spread.
  7. This is assuming you can tell ahead of time if price change will be "noise" or legitimate movement.

    Of course, if you can do that, you will be a millionaire very soon.
  8. kut2k2


    This definition of noise makes no sense to me. Like lucky lucille said, you need to give a concrete example.
  9. traderrn


    Noise in small chart is when price is moving from point A to point B in the big chart. Ideally you should be riding that noise and not entering. That's one way to avoid noise.

    When price is at point A in the big chart, meaning it is a critical area with a potential for entry, small charts will behave more responsibly. That's when you enter.

    When price is at point B in the big chart, that is your target (new high/low/channel outer line) and you exit. Now many of these are also good counter trending entry opportunity to play the retrace. Here again, the small chart will behave well if there is consensus that it is a retracing point.