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Attachments: D1 and M5, which is noiser?
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D1 and M5, which is noiser?

  • #1
  • First Post: Oct 7, 2009 12:35pm Oct 7, 2009 12:35pm
There is a general belief that price in lower timeframe is noisier than price in higher timeframe. While noise exists in different timeframes, I argue that the degree of noise is in proportion to the timeframes. i.e. the higher is the timeframe, the bigger is the noise.

Different time periods in a day do have different characteristics, for example, the volatility of London open is higher, as well as, rollover time. News are more likely to be released at some time periods, etc. An intraday trader has to take notice of all these, and should not be treated them as noise, although all these may make the intraday chart looks a bit noisier.

Intraday traders trading with lower timeframe can be more flexible in preventing scheduled news. When big news comes, they can keep their position clear. For D1 or above traders, they are more likely have to accept those noise like economic date release in their trading. In that perspective, D1+ traders may suffer more noise than a skilful intraday trader. Right?

Comments are welcome!
  • #2
  • Oct 7, 2009 1:53pm Oct 7, 2009 1:53pm
One day I read this: "It's not about the timeframe, it's about the trader". Very important imo.
Then try to define what noise is for you, because some type of traders may love it (aka: volatility).
If you're speaking about trend noise, than I should say that every timeframe has its own trend, so stick to it (aka: don't watch 4 timeframes contemporary) and apply your trading method. period.
You said that daytraders can avoid news period, that's correct I agree with that, but not everyone can trade lower timeframes, it's all about the psycology (aka: stress threshold).
Daytrading can obviously be more profitable, but you have to reach it with patience, working mainly on you than on the trading method.
That's why it is suggested to start with higher tf first. Only after proving yourself on it you can try to make things happen faster, by lowering tf.

That's my opinion. Sorry for the lenght. Have a nice...day.
  • #3
  • Oct 7, 2009 4:46pm Oct 7, 2009 4:46pm
Of course noise exists in all time frames. A chart is a chart. Dr Elder noted in his book that many people cannot tell one time frame from another just by looking at the chart.

The difference is that noise on a 5 min chart means that trades taken will mostly lose as the price hasn't moved significantly in either direction. Plus the fact that the time frame cycles more quickly thus producing more "false" signals during the same 24 hrs as the day chart. Thus a noisy 5 min chart can produce 5 small losers. On the other hand, noise on a daily chart provides at least some opportunity to take profit before the price reverses. Even if the profit is small...one small 20-30 pip winner once a day is WAY better than five 15 pip losers...
  • #4
  • Edited 5:42pm Oct 7, 2009 5:25pm | Edited 5:42pm
I can see calling too much information noise is if your goal is to
obtain a certain percent of a higher-TF move, so that only
certain larger news items or moves would apply to this trade.

I tend to take the opposite view. It's easier for me to believe
every piece of the chart is explainable in relation to the rest of
it. Removing information from the chart in higher TF's leaves
some movements separated in the lower ones unexplainable,
thus 'noisy'. That anyone would call news, which is the prime
mover of the chart, noise befuddles me.

So, the 1D gets my vote as being noisier. The 5', I only use
to see an overview speedily.
  • #5
  • Oct 7, 2009 6:25pm Oct 7, 2009 6:25pm
Quoting kk007
There is a general belief that price in lower timeframe is noisier than price in higher timeframe. While noise exists in different timeframes, I argue that the degree of noise is in proportion to the timeframes. i.e. the higher is the timeframe, the bigger is the noise.

Different time periods in a day do have different characteristics, for example, the volatility of London open is higher, as well as, rollover time. News are more likely to be released at some time periods, etc. An intraday trader has to take notice of all these, and should not...
As you say there is noise on all levels, big moves happen more often on smaller time-frames for obvious reasons, but the real difference is the size of the spread compared to the move. The lower you go in terms of time-frames the bigger your transaction costs are in proportion to the action you are trying to trade.
The breaking of a wave cannot explain the whole sea.
  • #6
  • Oct 7, 2009 7:26pm Oct 7, 2009 7:26pm
You are what you love, not what loves you.

Bit metaphorical, I admit. Noise is not there per se. A short-term trader on M5 charts will only look at the D1 for the day's direction and not be concerned whether or not it is flopping around for the week. A long-term trader using D1 is not even going to look at M5. Anybody who has had a trade move against them will blame it on "noise" on the particular timeframe they were using
  • #7
  • Oct 7, 2009 7:52pm Oct 7, 2009 7:52pm
Quoting kk007
There is a general belief that price in lower timeframe is noisier than price in higher timeframe. While noise exists in different timeframes, I argue that the degree of noise is in proportion to the timeframes. i.e. the higher is the timeframe, the bigger is the noise.

Different time periods in a day do have different characteristics, for example, the volatility of London open is higher, as well as, rollover time. News are more likely to be released at some time periods, etc. An intraday trader has to take notice of all these, and should not...
I don't quite understand what you're trying to explain with this. Fundamental analysis is played out on larger timeframe technical analysis. That's just a simple "truth" that I've known.
I dream, therefore I become.
  • #8
  • Edited Oct 8, 2009 10:22am Oct 7, 2009 9:08pm | Edited Oct 8, 2009 10:22am
Quoting mike w
I don't quite understand what you're trying to explain with this. Fundamental analysis is played out on larger timeframe technical analysis. That's just a simple "truth" that I've known.
Mike aren't you missing something in your above statement? If not, count me off cuz' I don't get it. Care to explain a bit more?

Quoting Craig;
As you say there is noise on all levels, big moves happen more often on smaller time-frames for obvious reasons, but the real difference is the size of the spread compared to the move. The lower you go in terms of time-frames the bigger your transaction costs are in proportion to the action you are trying to trade.
Craig, although I have to agree with you, regarding the transaction cost, it certainly could be perceived as greater value due to the smaller profit potential ratio in shorter time frames, aren't the required stop also bigger in a higher time frame, hence your risk increases to a point your transaction cost become neglectable ? Just a thought.
  • #9
  • Oct 7, 2009 10:57pm Oct 7, 2009 10:57pm
I did not know really what is usually meant by "noise" a few minutes ago, and, after reading this thread so far, I still do not.


What is "noise"?


(This should be fun...)
"If The Fool persists in his Folly he will become wise." - William Blake
  • #10
  • Oct 7, 2009 11:00pm Oct 7, 2009 11:00pm
Its only noise if those studying the lower time frames do not understand how to read Price Action...

Truth is, price action exists the same identical way whether on a 1 Minute chart or a Daily chart...one occurs faster than the other with more opportunities...

When you think of Time Frames, think Fractals...that's essentially what you're seeing.


Quoting kk007
There is a general belief that price in lower timeframe is noisier than price in higher timeframe. While noise exists in different timeframes, I argue that the degree of noise is in proportion to the timeframes. i.e. the higher is the timeframe, the bigger is the noise.

Different time periods in a day do have different characteristics, for example, the volatility of London open is higher, as well as, rollover time. News are more likely to be released at some time periods, etc. An intraday trader has to take notice of all these, and should not...
In Charts We Trust!
  • #11
  • Oct 7, 2009 11:09pm Oct 7, 2009 11:09pm
Quoting The Fool
I did not know really what is usually meant by "noise" a few minutes ago, and, after reading this thread so far, I still do not.


What is "noise"?


(This should be fun...)
Noise


http://i.investopedia.com/inv/092009.../book_icon.jpg
What Does Noise Mean?
Price and volume fluctuations in the market that can confuse one's interpretation of market direction. Used in the context of equities, it is stock market activity caused by program trading, dividend payments or other phenomena that is not reflective of overall market sentiment. Also known as "market noise".
http://i.investopedia.com/inv/092009...y/inv_icon.jpg
Investopedia explains Noise
In general, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. Noise traders attempt to take advantage of market noise by entering buy and sell transactions without the use of fundamental data.
  • #12
  • Oct 7, 2009 11:19pm Oct 7, 2009 11:19pm
Quoting opie999


Investopedia explains Noise
In general, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. Noise traders attempt to take advantage of market noise by entering buy and sell transactions without the use of fundamental data.
"meaningful market movements" - how is that not a completely subjective term?

There is no "noise" - every "market movement" has meaning, relative to any observer's willingness and/or ability to apprehend it.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #13
  • Oct 8, 2009 12:27am Oct 8, 2009 12:27am
Quoting The Fool
"meaningful market movements" - how is that not a completely subjective term?
Exquisitely ambiguous, isn't it? When looking it up I was expecting something a lot more mathy with talk of standard deviations and median distributions and stuff.

Quoting The Fool
There is no "noise" - every "market movement" has meaning, relative to any observer's willingness and/or ability to apprehend it.
Yep. Price is what it is regardless of subjective perceptions imposed on it. "Noise" is an illusion, an artificial construct.
  • #14
  • Oct 8, 2009 11:21am Oct 8, 2009 11:21am
Quoting X.Oden
Its only noise if those studying the lower time frames do not understand how to read Price Action...

Truth is, price action exists the same identical way whether on a 1 Minute chart or a Daily chart...one occurs faster than the other with more opportunities...

When you think of Time Frames, think Fractals...that's essentially what you're seeing.
Hi XO,

Do you really think that after a person mastered Price Action, s/he will not see any noise on the chart?

Could you tell me how can I achieve this?

Many thanks.
kk
  • #15
  • Oct 8, 2009 11:23am Oct 8, 2009 11:23am
Sound to me that people here do not think M5 is more noisier than D1.

True the relative cost of daytrading is way higher than D1 chart trader, but spread is actually another issue.
  • #16
  • Oct 9, 2009 9:45am Oct 9, 2009 9:45am
Time to put up or shut up, post any given 5 min naked chart and I'll show you what I see.

Fair enough?
  • #17
  • Oct 9, 2009 10:09am Oct 9, 2009 10:09am
Quoting PipsRaker
Time to put up or shut up, post any given 5 min naked chart and I'll show you what I see.

Fair enough?
Not completely sure, what you are trying to do... but here is a M5 chart.
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  • #18
  • Oct 9, 2009 11:04am Oct 9, 2009 11:04am
Thanks kk007,

What I'm trying to do is to convey the thought "a chart is a chart is a chart, not matter the timeframe" without being missunderstood.

Ok back to your example... that's an easy one... that's noise!
  • #19
  • Oct 9, 2009 11:47am Oct 9, 2009 11:47am
Sorry couldn't help myself

Here's what I see... easy peasy.
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  • #20
  • Oct 9, 2009 11:58am Oct 9, 2009 11:58am
One could argue, it's easy in hindsight and of course it is, but I'm prepare to defend each entry and exit.

"Chance favor the prepared mind" -- Louis Pasteur
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