Market noise

Discussion in 'Trading' started by gifropan, Jun 8, 2010.

  1. Can anyone explain what is meant by market noise and for intraday trading does the market noise depend on the time of day, economic figures or other factors.
  2. Noise is unintelligible price action.

    However, "unintelligible" is a subjective judgment that depends on each traders opinion.

    One traders "noise" could be another traders entry signal.
  3. The concept behind "noise" is that some data is better discarded and only distracts from the "real picture".
    In my view this concept is not helpful.

    The opposite makes more sense: The more data available the better the picture.
  4. Could one possible explanation be that for any given time frame there is a minimum amount of market movement below which the data can or should be discarded. For example, if one follows an intraday chart of, say, FTSE, during the dull periods of the day most indicators go into a neutral mode and also because the intraday trading ranges become too small, they generate too many false breakouts. I try to ignore market moves under ten tick in the FTSE on an intrady 2 min bar chart. Does this make any sense?
  5. What you say makes perfect sense. All of the data is critical for accuracy.

    Think of music. You can have the most melodic and beautiful piece of music but if you continue to speed it up, at a point, it will become . . . just noise.
  6. Noise is what stops you out right before price takes off in your predicted direction :D
  7. Why is it that a potential great thread dies due to apathy while ridiculously stupid threads go on and on and on?
  8. Perhaps because the concept of "noise" is stupid. From an information theory viewpoint, it's ALL signal.
  9. All music is noise (signal) too right?

    It's only stupid if you know how to see it (or think you know how to see it), know what causes it (or think you know what causes it), know what effect it has on one's trading (or think you know what effect it has on one's trading) and want to make a condescending remark about it.

    If you don't, the lack of information creates ignorance and that is why people ask the question.
  10. Well I can attest that "noise" was tripping me up. It wasn't until I started looking for a "solid move" in the markets before entry that I started making more money again. I have a theory that a lot of newbies following T.A. have beginners luck because they haven't refined their charts. Then later, when they do refine their charts, the noise messes them up. Survivors figure out how to sort noise out.

    #10     Jun 9, 2010