What do you consider noise?

Quote from braincell:

Living in a noisy world has it's benefits, like extracting profits from a quasi-random walk chart. Nothing wrong with noise, imho.
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So if it's all noise, then timing becomes completely irrelevant. Is that what you're saying?
 
Quote from Brass:

So if it's all noise, then timing becomes completely irrelevant. Is that what you're saying?
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Yes it's irrelevant (mostly) on a single instrument, not on a portfolio. To capture the ranges of the noise, you need as large a portfolio as possible where hedging can be used. Price is more likely to oscillate than trend in many time-frames. On top of that, you balance the folio with trend-following strats (the noise-reduced fat tails), and you're good to go! lol

... i'm not sure that makes any sense...

I'm basically saying : use mean-reversion and noise to your advantage on one part of your folio, and trends and no-noise on another. How you pick them is the edge, imho. It's good to have a folio of 100 or more instruments for that kind of thing.
 
Quote from braincell:

Yes it's irrelevant (mostly) on a single instrument...
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Then how do you account for people who largely or solely trade a single instrument (or sector)?
 
Is anything really noise? It's all information, even on the five minute chart.

Evaluate it at the end of the day and you know can see the S/R appears more 'sloppy' than on the higher TF, but how much effort does it really take for orders to press and exaggerate up/down around those lines...not much. smaller TF, wider stops.

Use tight stops on small TF and at the end of the day you say i got stopped on noise.

There is no noise. All information.
 
Quote from Brass:

Then how do you account for people who largely or solely trade a single instrument?
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I admire the effort, and the nail-biting shape of the equity curve that usually follows it, but also think they're making it harder than it has to be.

Noise can be exploited on a single instrument obviously, it's just that the time series of such an equity curve is compressed tighter on a single instrument. Think about it. If you trade 100 instruments and get 1 fill every 2 days for each instrument, you are getting filled 50 times per day or once every ~8 minutes. The only difference is that if you're trading on info with lower noise because the 4 day round trip with a small position has less noise in it. It's still high frequency, but you're avoing the n-minute noise of the charts. You can even do it with a 50k account.
 
Quote from satchel:


There is no noise. All information.
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If you can tell me when a desk starts buying in order to hedge 3 different unrelated orders it holds from 1 day ago, please share that info. Usually that info is witheld from other market participants, so it's information alright - but only for the person who is hedging (possibly in the wrong direction in my example). You'd also need to know the reason for a buy/sell, and there are 100s of those, in order to interpret what the buy/sell means. It wouldn't be noise if you had a constant phone line to every buyer and seller in the world telling you why they're doing what they're doing (or their bots).
 
Quote from braincell:

I admire the effort, and the nail-biting shape of the equity curve that usually follows it, but also think they're making it harder than it has to be.

Noise can be exploited on a single instrument obviously, it's just that the time series of such an equity curve is compressed tighter on a single instrument. Think about it. If you trade 100 instruments and get 1 fill every 2 days for each instrument, you are getting filled 50 times per day or once every ~8 minutes. The only difference is that if you're trading on info with lower noise because the 4 day round trip with a small position has less noise in it. It's still high frequency, but you're avoing the n-minute noise of the charts. You can even do it with a 50k account.
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I think you make some interesting assumptions as to where noise resides and regarding the virtues of broad diversification.
 
Quote from braincell:

It wouldn't be noise if you had a constant phone line to every buyer and seller in the world...
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Yea, VALIS - I thought everyone had one of these:p
 
Yeah it all depends on your trading style. But for intraday trades I like to use tick charts because it does filter some of the noise out of 5 minute intervals. It's a better display of the tape during the day.
 
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