Noise removal is one of the most important aspects of active trading. By employing noise-removal techniques, traders can avoid false signals and get a clearer picture of an overall trend. Here we take a look at different techniques for removing market noise and show you how they can be implemented to help you profit.
What Is Market Noise? Market noise is simply all of the price data that distorts the picture of the underlying trend. This includes mostly small corrections and intraday volatility. To fully understand this concept, let’s take a look at two charts – one with noise and one with noise removed:
Before noise is removed:
After noise is removed:
Notice that in Figure 2, there are no longer any areas in which the trend is not easily seen, whereas in Figure 1, it is often difficult to identify whether the trend is changing on some days. The...
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