# How much noise is there in a signal?

Forums ProRealTime English forum General trading discussions How much noise is there in a signal?

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• #181844 Report

How much noise is there in the price of, for example, the Dow Jones?

1%, 2%, 3% or maybe 10%?

In electronics there are several terms that describe the noise in a signal.

A few basic concepts:

In statistics, the “mean” is the average values of a signal (data).

In electronics, the average is usually called the DC (Direct Current) of the signal.

In statistics, the standard deviation is a measure of the deviation from the mean.

In electronics, the standard deviation is usually called the AC (Alternating Current) of the signal, so how the signal fluctuates around its mean.

A commonly used term in electronics is the RMS (Root-Mean-Square) value, the RMS value measures both the DC and the AC component.

When a signal has no DC component, the RMS value is equal to the standard deviation and when no AC component is present, the RMS value is equal to the average.

Another commonly used term is the CV (Coefficient of Variation) which shows the amount of noise, in a signal, in percentages.

CV = (Standard deviation / Mean) x 100%

The RMS -value of the Dow Jones (screenshot) is almost equal to the average of the signal meaning that there is (almost) no AC component present.

The CV value (noise) of the Dow Jones (screenshot) is on average <u>between 1 – 2%.</u>

(The CV value of Bitcoin is around 20%)

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#181851 Report

IOW, Americans don’t make much noise, right ?
Great news !

#181852 Report

On a more serious note, I try to see what we can do with that. And as far as I can judge it, it would not work the same way on a shorter term. And the shorter term is what we use for trading. Just some notes :

Thus somehow the mean should not be related to the period of time, which it obviously always is.

What helps of course is filtering the noise first.
Ehh …

There is not much noise in the BitCoin rising today.
There is not much noise in the BitCoin dropping earlier this week.
There is 10% noise in the BitCoin over the past week.

At least that means that my TimeFrame should not be a week or longer. No wait, when the noise is filtered out there is no problem and I better had that BitCoin.
Once upon a time that also counted for AliBaba. Anyway not much noise the past weeks. Not much money left as well. 🙂

#181880 Report

@PeterSt You are the expert of noise…

#181888 Report
#181908 Report

@PeterSt
You are the expert of noise…

Sure. White trace is power supply noise. Red trace is system output noise.

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