In the forex market, there are a large number of factors that affect the price of an asset. Even experienced traders cannot fully anticipate their impact. These factors include the so-called market noise . Some novice traders are aware of this phenomenon. However, they do not always understand what it is and how this noise can affect trading. Therefore, I decided to devote a separate article to this concept.
Simply put, market noise is price fluctuations that defy any logical explanation. There are different opinions about the reasons for its appearance. As a rule, market noise occurs when neither bulls nor bears have a clear advantage in the market. Individual trade transactions can lead to a short-term price movement in one direction or another. Market noise poses some danger to trading, since it, albeit insignificantly, still distorts the readings of the indicators. And this, in turn, leads to the formation of false signals to enter the market.
How to deal with market noise
I would like to note that if you trade on large timeframes, then this question should not bother you at all. The fact is that market noise is especially evident in small time frames and can affect trading results. The smaller the timeframe, the more harm from such noise. This leads to the first way to deal with it. It consists in switching to a larger TF. However, not all traders have this desire.
The second way to deal with market noise involves the use of appropriate tools. I mean indicators. Some of them help identify market noise. If the indicator indicates such a phenomenon, then it is better for the trader to temporarily refuse to open trade deals. For example, the columns of the well-known MAKDI indicator are small in the periods when there is noise on the market.
But there are other indicators as well. Their algorithm includes a mechanism for eliminating market noise. And therefore, you can work with such instruments without fear of signal distortion. Earlier in one of the articles I talked about a similar indicator. It is called Ozymandias.
Market noise is a phenomenon that cannot be completely eliminated. He was and always will be on the market. Traders can only minimize its impact on their trading. This is especially true for those of them who are engaged in pipsing or scalping.