What causes Market Noise? | Trading Strategy Improvement Requires this Understanding

Price action can be categorized into 1. Meaningful price moves and 2. Noise. It is the meaningful prices action that traders mostly attempt to target with the trading strategies. However, the noise component can often reduce the effectiveness of those trading systems. This is why it is so important to have a good understanding of what causes noise so that steps can then be taken to alleviate its effects. Without this understanding, the task at hand will be challenging.

In this episode, Martyn Tinsley presents a simple illustration to explain why noise occurs and why its effect on price action appears to be random.

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This is Episode 82 in the Darwinex 'Algo Trading for a Living' Playlist, and Episode 2 of the 'Market Noise' mini-series.

Video Contents:
00:00 Introduction
00:56 Perry Kaufman Market Noise Reference 'Trading Systems & Methods'
01:48 Market Noise Analogy
02:00 What is Noise and what causes it?
02:08 Categorising Price Action
02:43 Why does noise occur?
04:56 Example illustration of Random Noise
07:46 Coming soon
08:01 Summary

Content Disclaimer: Past performance is not a reliable indicator of future results. The contents of this video (and all other videos by the presenter) are for educational purposes only and are not to be construed as financial and/or investment advice.

[mjay]

I just can't help but comment this time... this mini series is pure gold, like all the other algo trading topics on this channel. I can't wait for the next episode.

[juamparochaa]

Thanks, brother. I also admire Perry Kaufman a lot. great video.

[edh]

These videos blow my mind! This has transformed how I look at the markets in under 10 mins. Roll on ep. 3!!

[mohamadalikolahdouzmohamad]

Very valuable knowledge you are sharing here as always. Thank you very much sir. I hope multiple entries be mentioned in this new mini series.

[fredbloggs]

Thank you, that is such a clear and concise explanation of price movements that are driving me nuts trying to understand them.

[HitAndMissLab]

There is no such thing as market noise, from market-makers perspective.