Signals, Noise and (Noiseless)charts: POST E-DECMA EFFECT

Signals, Noise and (Noiseless)charts: POST E-DECMA EFFECT

E-DECMA 2021 was wonderful and extremely useful for fine tuning my “System2Trading” concepts; Iam sure the euphoric and steroids effects from the conference will propel all of us till………… The philosophies of trading, investing was discussed by many experts and there were some interesting perspectives regarding Signals and Noise, Subjective and Objective trading, Importance of trading systems; overall the drive was toward the noiseless charts with objective trading system in place should make you profit. Well anchored concepts. As an intraday trader, I follow my own system and these concepts reaffirmed my system approach toward my trading style. Let me think aloud and the reason of this post will unfold.

With due respects to the experts in field of noiseless charts, let me dissect what is Signal and Noise! Signal and Noise are used in many domains, including trading and measured as Signal:Noise ratio, usually denoted as SNR; if SNR is more than 1 then it means signal is more than the noise. Iam sure till now we should be on same boat. Now comes the fine tune…. What is signal or What is noise? Both are DATA. When the data is understood by our tool, be it a chart or technical or fundamental or our mind, we classify it as signal; and when data cannot be INTERPERTED …. it is NOISE!!!!!!  Just sit back and read the thoughts again…. “it just says ignore noise because I can’t understand it!!!! such a paradoxical approach when we want to understand the market which cannot be understood in conventional approach!!!!!  Traders based on point and figure, renko will state candle stick and bar charts are full of noise…… Positional Candle stick traders will say time frame lower than one hour or one day are full of noise….. Intraday traders will say short term timeframes like in seconds is full of noise ………. So, noise is in the chart or in our mind… our thoughts……??

Legendary intraday scalper like Bob Volman proved it is possible to be profitable trader, with just 7 patterns and “70 tick chart”; Tick charts are very amazing for intraday trading, unfortunately not available to Indian retail traders and nearest equivalent to 70 tick charts are 30 second timeframe. And it is noise less!!!! Another documented trader for many years, with its daily trade documentation for past 10 years, I think is Al brooks, who is considered as “Traders Teacher” documents all his trade, trade setup in 5-minute time frame, in his website daily for years!!!! If traders are not aware of their documentation, then it is imperative we explore that ………. So, does it mean there is no noise??? Or it means the switch to ignore the noise should be within you……. if so, it becomes subjective!!!! Every noise…. I ignore to rationalize, ignore to account for in my analysis is a compromise and it should be very conscious act. Signals are the visual and mathematical patterns and Noise is the context!!!! One is skewed towards objective and other is skewed towards subjective.  The follow-through of dogmatic approach of removal of noise from the charts is the next aspect- subjectivity in trading. If you want to be a profitable trader then you need to objectivize your trading. No second thoughts on that ….. but does it mean no subjectivity and subjectivity in trading is the prime cause of failure???? If this is true, then what is the starting point of our objective approach?? Is it not the starting point is the most important for all measurements and which is always subjective!!!! Well, these loud thoughts have been answered in the E-DECMA… not in principle but as  “abstract’ and “in between lines” concepts.

Let me extend my subjectivity and objectivity thoughts to “Turing test”. Those who have explored the avenues of “captcha test” will very be aware of the differentiation between the computer and humans processing which is extension of our subjectivity and objectivity activity. “Captcha” which stands for “Completely Automated Public Turing test to tell Computers and Humans Apart” should be one of the directions for those who want to fine tune the analytic component of a trader. While I do not want to go in details of these remarkably interesting topic, I would like to share the observation that follows. Iam sure all of us have one point or other entered the input in captcha to confirm that we are indeed humans. The image below is one such thing to differentiate the computers from humans.

recaptcha

I do not think any of our brain will make mistake to read those letters…… just because it is slanting or because of ragged edges, because of its slightly curvy nature, because of some horizontal line crossing across…………. But the objective computers will make the mistake! Astonishing fact, what it says- time and again, that brain is much more powerful in categorizing, scanning, compartmentalizing, analyzing, and passing a verdict on objective patterns and know how to remove the subjectivity…. the noise from the pattern and give a precise true meaningful result; iam sure no computer is capable of such a feat, provided our inputs are precise. Maybe we should do that in trading also by entering inputs into your “brain captcha” before hitting the buy or sell button!!!

It is nice to observe lot of steroids post E DECMA…. Unless channelized properly, many traders may draw conclusions before the game begins!!!! As I stated starting of my post, this conference ascertained my system trading approach and keep my three pinned statements bold and clear.  And iam sure it would have been the same for your trading system… be it TOI, MAST, D-MAST, RS, CAMARILLA…. the 3 pinned approaches I follow may be of use to you in abstract way.

1 Train your MIND: – Respect the noise, notice the noise, then see what to do with that noise. Because that is the context. This will give a big edge to any trading system for sustainability. “Without Noise, there is  no Signal.”

2 Trade your MIND: – Expose, explore to right back tested, forward tested, charts, pattern, results to your mind. This will give us the profits based on “a priori” not just based on beliefs and experience. (Proponents of “Trade what you see” may think it is contradictory. But truth is “what your mind does not know, eyes cannot see”)

3 MIND your trade: – Profits gets pocketed to our account only when you closely know how to micromanage and mind the ongoing trade. As an intraday trader, iam acutely glued to this Or else profits will disappear from our table faster than we realise.

 

Hope my little post will help you in some way to organize your own system……

Happy trading,

Sathya NR (SNR 2.0)

    • E-DECMA 2021 was wonderful and extremely useful for fine tuning my “System2Trading” concepts; Iam sure the euphoric and steroids effects from the conference will propel all of us till………… The philosophies of trading, investing was discussed by many experts and there were some interesting perspectives regarding Signals and Noise, Subjective and Objective trading, Importance of trading systems; overall the drive was toward the noiseless charts with objective trading system in place should make you profit. Well anchored concepts. As an intraday trader, I follow my own system and these concepts reaffirmed my system approach toward my trading style. Let me think aloud and the reason of this post will unfold.

      With due respects to the experts in field of noiseless charts, let me dissect what is Signal and Noise! Signal and Noise are used in many domains, including trading and measured as Signal:Noise ratio, usually denoted as SNR; if SNR is more than 1 then it means signal is more than the noise. Iam sure till now we should be on same boat. Now comes the fine tune…. What is signal or What is noise? Both are DATA. When the data is understood by our tool, be it a chart or technical or fundamental or our mind, we classify it as signal; and when data cannot be INTERPERTED …. it is NOISE!!!!!!  Just sit back and read the thoughts again…. “it just says ignore noise because I can’t understand it!!!! such a paradoxical approach when we want to understand the market which cannot be understood in conventional approach!!!!!  Traders based on point and figure, renko will state candle stick and bar charts are full of noise…… Positional Candle stick traders will say time frame lower than one hour or one day are full of noise….. Intraday traders will say short term timeframes like in seconds is full of noise ………. So, noise is in the chart or in our mind… our thoughts……??

      Legendary intraday scalper like Bob Volman proved it is possible to be profitable trader, with just 7 patterns and “70 tick chart”; Tick charts are very amazing for intraday trading, unfortunately not available to Indian retail traders and nearest equivalent to 70 tick charts are 30 second timeframe. And it is noise less!!!! Another documented trader for many years, with its daily trade documentation for past 10 years, I think is Al brooks, who is considered as “Traders Teacher” documents all his trade, trade setup in 5-minute time frame, in his website daily for years!!!! If traders are not aware of their documentation, then it is imperative we explore that ………. So, does it mean there is no noise??? Or it means the switch to ignore the noise should be within you……. if so, it becomes subjective!!!! Every noise…. I ignore to rationalize, ignore to account for in my analysis is a compromise and it should be very conscious act. Signals are the visual and mathematical patterns and Noise is the context!!!! One is skewed towards objective and other is skewed towards subjective.  The follow-through of dogmatic approach of removal of noise from the charts is the next aspect- subjectivity in trading. If you want to be a profitable trader then you need to objectivize your trading. No second thoughts on that ….. but does it mean no subjectivity and subjectivity in trading is the prime cause of failure???? If this is true, then what is the starting point of our objective approach?? Is it not the starting point is the most important for all measurements and which is always subjective!!!! Well, these loud thoughts have been answered in the E-DECMA… not in principle but as  “abstract’ and “in between lines” concepts.

      Let me extend my subjectivity and objectivity thoughts to “Turing test”. Those who have explored the avenues of “captcha test” will very be aware of the differentiation between the computer and humans processing which is extension of our subjectivity and objectivity activity. “Captcha” which stands for “Completely Automated Public Turing test to tell Computers and Humans Apart” should be one of the directions for those who want to fine tune the analytic component of a trader. While I do not want to go in details of these remarkably interesting topic, I would like to share the observation that follows. Iam sure all of us have one point or other entered the input in captcha to confirm that we are indeed humans. The image below is one such thing to differentiate the computers from humans.

      recaptcha

      I do not think any of our brain will make mistake to read those letters…… just because it is slanting or because of ragged edges, because of its slightly curvy nature, because of some horizontal line crossing across…………. But the objective computers will make the mistake! Astonishing fact, what it says- time and again, that brain is much more powerful in categorizing, scanning, compartmentalizing, analyzing, and passing a verdict on objective patterns and know how to remove the subjectivity…. the noise from the pattern and give a precise true meaningful result; iam sure no computer is capable of such a feat, provided our inputs are precise. Maybe we should do that in trading also by entering inputs into your “brain captcha” before hitting the buy or sell button!!!

      It is nice to observe lot of steroids post E DECMA…. Unless channelized properly, many traders may draw conclusions before the game begins!!!! As I stated starting of my post, this conference ascertained my system trading approach and keep my three pinned statements bold and clear.  And iam sure it would have been the same for your trading system… be it TOI, MAST, D-MAST, RS, CAMARILLA…. the 3 pinned approaches I follow may be of use to you in abstract way.

      1 Train your MIND: – Respect the noise, notice the noise, then see what to do with that noise. Because that is the context. This will give a big edge to any trading system for sustainability. “Without Noise, there is  no Signal.”

      2 Trade your MIND: – Expose, explore to right back tested, forward tested, charts, pattern, results to your mind. This will give us the profits based on “a priori” not just based on beliefs and experience. (Proponents of “Trade what you see” may think it is contradictory. But truth is “what your mind does not know, eyes cannot see”)

      3 MIND your trade: – Profits gets pocketed to our account only when you closely know how to micromanage and mind the ongoing trade. As an intraday trader, iam acutely glued to this Or else profits will disappear from our table faster than we realise.

       

      Hope my little post will help you in some way to organize your own system……

      Happy trading,

      Sathya NR (SNR 2.0)

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