How Noise Reduction Works

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NOISE REDUCTION BASICS

Useless data, noise, is a common enemy in many areas of physics, math, and chemistry. Noise reduction is removing smaller anomalies from a graph so you can observe the bigger picture better.

I won’t get too much in detail here because this is heavy math for a very simple effect. As a trader, you don’t really need to know the math behind it to use it in your favor, as long as you know how it affects your chart you’re good. But if you really want to understand what I did…well I warned you: Gauss’ Method, Normalization, Quantile Normalization, Laguerre Polynomial, Conditional Distribution, Noise Reduction Basics. It’s just like a calculator, you don’t need to know how to make one to use it.

This is how Spectro looks like without any normalization technique.

How Noise Reduction Works

 

Now observe what happens to the graph after we apply the noise reduction.

In plain English: it makes your graph a lot smoother. It sacrifices speed and entry/exit precision for clearer signals and fewer trades. This is useful when you’re trading smaller timeframes or you’re looking for automation signals – this might be beneficial for automation purposes but experience shows it affects manual trading negatively in general. (It really depends on your strategy though)

Now it comes integrated by default. You don’t have to worry about this 🙂

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