Noise – Indicators & Patterns

Noise in technical analysis
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When you are new to Technical Analysis there are 3 things you learn first – Candles, Indicators, and Patterns. But what if I told you all these 3 are full of noise?

What is a noise?

Noise is anything that masks the meaningful information or data. In technical analysis context, noise is everything that keeps you away from taking concrete decisions.

How often would you notice, talk, or mention following:

  • There is a gap here & price must come to fill it
  • Today there was a gap down, so expect a pull-back
  • I can plot patterns looking at historical charts, but rarely play such patters live
  • There is a flag, stock must breakout or breakdown
  • Is it a doji or a pin bar?

The list is endless.

Candle that looks a doji on one time frame, looks like a normal candle on longer time frame. That means, candles change shape on different time frames.

Candles leave gaps and it puts a thought in trader’s mind that price must come back to fill the gap. Perhaps. But who can say when will price come back to fill the gap?

Candles show high & low, but it is impossible to determine binary trend from candles.

In sum, candles are useless.

Oh pattern, my pattern

There are some common patterns that retail trader swear by. Some of such are:

  • Flag-Pole
  • Pennant
  • Cub and Handle
  • Round bottom
  • Head and Shoulder

There is nothing wrong trading with patterns but if you fail to understand context of the pattern, then you are going to end up losing.

Typically, retail traders play any pattern for breakout and not breakdown.

This makes it very easy to exploit patterns to lay traps for retail traders. We must remember one thing very clearly – patterns are footsteps of pro-traders. These footsteps are crafted with grate precision and with an intent. Had it been so easy to play patterns then every retail trader would have been a pro-trader.

Tip: Focus on price action and not patterns

What is the best indicator?

Isn’t this the most common question comes to your mind? What indicator I must use so that I get an edge over others?

Indicators tell you only partial picture. There is rarely anybody would can use just 1 indicator and claim to be a successful trader.

Eventually, when you don’t get above average results using one indicator, you add one more, and then one more, and finally end up with a messy setup.

No Alternative to Price Action

No matter how good you are at spotting pattern or channels, breakouts or breakdowns, you cannot survive long enough if you don’t learn to interpret price action.

This is precisely why my ATMP Method of Level Plotting has been so successful over past many years. Level plotting is based on price action only. Unlike support/resistance or demand/supply zones, level plotting goes a step further to include reaction & behavior of market makers.

Brief of Level Plotting

I cover level plotting in detail in my ATMP – Alpha Trader Mentorship Program which is conducted live every Saturday and pans over 5-6 weeks of amazing learning experience.

More about the program – What is ATMP?

Also read testimonials of students from previous batches.

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