noise:
irregular fluctuations that accompany a transmitted electrical signal but are not part of it and tend to obscure it.
I don't believe noise exists in the charts. Someone said,
'semantics!' ... and concluded we could instead say choppiness, etc.
Ok, that's cool.
But ... someone else doubled-down and said that, in effect,
noise is what you can't read in the charts, but you can later read if you get good at reading charts.
I wanted to go deeper into this 'reading' thing, but I didn't want to guess at what was
exactly meant by the use of the word
'reading' with respect to something that is a chart rather than words. I wanted the definition, as defined by the user themself (not by me, or a third party).
Making assumptions about what others
mean is the root of much chaos in the world.
But, I received no clarity. So, in closing...
Assuming arguendo that 'noise' exists, then it should continue to exist no matter how long you look-at or 'read' the chart (or study many other charts). That's what noise is--by
standard definition. It doesn't come and go based upon the observer's skill at 'reading,' unless we are talking about some type of quantum phenomenon.
If you can later understand it (after much reading)...then it most certainly wasn't noise.
...and have less noise on longer time frames.
I've heard this over the years, and used to regurgitate it as well.
Is there really "noise?"
1. The charts are just a record of the prices that real and actual trades took place over time and the amount of shares involved. A record of a market places purchases/sells. Where is the "noise?" What is this "noise?" Why would some trades be labeled as "noise," and not others? Who makes that determination?
2. Assuming this "noise" exists, and dissipates when you group the trades into larger categories for analysis (looking at longer timeframe charts); then this would imply that HFT's are successfully trading "noise." How can that be possible? And to a lesser degree, day traders would also be successfully trading noise.?
A movement in price that the trader doesn't have the ability to read is what he calls noise or chop. But, when his chart reading ability improves, noise and chop disappear!
Ok, what do you mean by the trader not having the ability to "read" the price movement. It's on the chart, no?
Generally, people call noise what they can't handle, or won't handle.
Yeah, I know.
Makes discussing things chaotic and meaningless if everyone decides to use their own, unofficial definitions for perfectly good words.
It's like traveling in a foreign country as a tourist. Sure one can get by with a translation book or device. However to really understand and communicate, one has to learn vocabulary, grammar and syntax. More importantly though, is to converse with the locals. It's entertaining to think that someone can read a book and then be able to communicate in that language. It's a start but the financial field is so vast with so many different ways to cut and slice the data that it quickly becomes overwhelming.
How does one make sense of it all?
A good start is take an approach that simplifies the complexity. Reducing things down into it's smallest components is useful. In physics, it doesn't appear we've found the limit yet. And yet, we've been able to innovate based on observable characteristics.
So what are the observable characteristics one could focus upon to improve 'reading' the market?
