What do you consider noise?
- Thread starter mcteague
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I agree that some price action is just not tradeable and could therefore be called "noise", but there are trading models that take into account every tick and for those models nothing, or almost nothing, is "noise". For example, if you have a time-based trading model, every minute of market action "matters" to that model, so regardless of what price is doing, as long as the clock is ticking, it's important to your model.
As far as Elliott Wave is concerned, since I brought it up and you mentioned it, I agree that it is impractical and most of the traders who try to use it are unsuccessful in doing so. But, as a model of HOW to think about the market, I think it is very useful. As an analogy, a lot of what the first generation of quantum physicists thought was right turned out to be wrong as the tools for measuring physical phenomena became more accurate, but the way in which they were wrong led to a new way of thinking which has endured and the world of physics will never be the same.
Because of its fundamental flaws, Elliott Wave was dead on arrival, but the type of thinking which prompted the discovery of Elliott Wave will always be useful.
Probably a different answer to what you are looking for OP,but in my case anything between highs and lows.
This is a great example to work from ... the "signal" you are following is Highs & Lows. Price-prints in between are not (necessarily) noise, most often merely transition from 1 signal point (high or low) to the next (low or high).
Noise is what makes an irrelevant price-print becomes a high/low according to your rules, as well as what makes a pertinent price-print escape your high/low definition.
(in other words, noise is what makes what you see different from what the signal really is).
One thing I noticed is that noise can at least sometimes be defined objectively as well as subjectively. For example, a trend trader might consider anything that is not trend to be noise, BUT there is a definition of noise that accounts for both trend and counter-trend. IOW even if you only trade RTM, noise can be defined in such a way that it excludes both trend and counter-trend, even if you only trade one of those. The CATSCAN blackbox system is based on this idea, allowing the trader to switch trading styles (trend or counter-trend) depending on which price regime he is in. And there is a regime where no trading takes place, which can be called the "noise regime" for lack of a better name.