Can "Noise" Be Traded?

[abogdan]

Quote from OddTrader:

Are you implying nothing else is tradable?

Imperfections of the market is the only driving force behind the price fluctuations. Other wise we would buy and hold stocks forever. The noise (all kinds of it) is responsible for very existence of a trader. But, of course, it is just my point of view and I will respect any other point of view expressed on this thread.
Cheers,

 

[OddTrader]

Quote from abogdan:

The noise exists on any level. If you trade weekly charts you just simply deal with different kind of frequency and amplitude of the noise compared to, let say, 5 min chart. However, the principles of dealing with this noise will remain relatively the same. There are two major principles of treating the noise on any level:

1. Filter it (using, moving averages, FIR filters, etc.)

2. Use it to trade (employing any counter trend technique like bands, oscillators, RSI etc. that work well on detrended signal)

Those are basics, obviously. But recognizing the noise is a very fruitful exercise for anybody whether you use it or filter it. The question becomes then what signal gives you more $$$ per trade. Simple observation could be also made on that respect:

The sum of all the squiggles is always greater then a straight line connecting the ends

My 2 cents:

For the same data set, one system may produce lesser noises than another system, due to the design and the underlying concept/mindset of the system designer, providing the productive signals are the same (in terms of number and timing and else).

The system of lesser noises generally would produce more profits (unless the claim that noises could increase profits is valid).

To me, "Noise or imperfections are the only things that are tradable!" would be very hard to comprehend.

 

[OddTrader]

Quote from abogdan:

Imperfections of the market is the only driving force behind the price fluctuations. Other wise we would buy and hold stocks forever. The noise (all kinds of it) is responsible for very existence of a trader. But, of course, it is just my point of view and I will respect any other point of view expressed on this thread.
Cheers,

It seems Hypostomus is a noise expert. Most likely he would have a better answer than me.

 

[abogdan]

Quote from OddTrader:

It seems Hypostomus is a noise expert. Most likely he would have a better answer than me.

:

 

[damir00]

Quote from OddTrader:
The system of lesser noises generally would produce more profits

other way 'round: systems with less noise produce less profit because there is less pricing "discrepancy".

"Noise or imperfections are the only things that are tradable!" would be very hard to comprehend.

a perfectly priced market would be completely untradable. prices would not move at all for long stretches of time - and then gap to somewhere else where they would again not move at all.

 

[abogdan]

Quote from damir00:

other way 'round: systems with less noise produce less profit because there is less pricing "discrepancy".



a perfectly priced market would be completely untradable. prices would not move at all for long stretches of time - and then gap to somewhere else where they would again not move at all.

Agree 100%

 

[ElCubano]

Quote from damir00:


a perfectly priced market would be completely untradable. prices would not move at all for long stretches of time - and then gap to somewhere else where they would again not move at all.

I dont know about tradable ( your meaning of it ) but using the example above had you positioned yourself in the direction of the gap ( up or down ) you would make money ( ie. tradable in my opiinion ) ..... no??? In fact the lack of 'noise' would make it quite easier to trade.....no??

 

[ktmexc20]

Let's put it this way. As for the es as an example, the only consideration is the flow in favor with your position and if there's traffic up ahead... 25 basis is better than covering IB commish. No?

 

[murray t turtle]

Quote from ktmexc20:

I pose this as a question.

Actually my question is... in your opinion to what degree?

==============================================
Ktmex-20
Some whose job includes trading ,say 5 minute noise & more or less noise , like specialists tend to do well;
actually prefer less noise like @ end of day, @ end of month.


Interesting a NYSE Bank manager also mentioned that business expression;
at the end of the day.

 

[ktmexc20]

Quote from murray t turtle:

==============================================
Ktmex-20
Some whose job includes trading ,say 5 minute noise & more or less noise , like specialists tend to do well;
actually prefer less noise like @ end of day, @ end of month.


Interesting a NYSE Bank manager also mentioned that business expression;
at the end of the day.

Flow...
...and end effects.

Yeah, Yeah.
I'm hip, I'm hip.