Market Noise refers to transactions that are erratic & unrelated to fundamental value. This includes mostly small price corrections & intraday volatility.
❣️Share prices fluctuate up & down daily & the ability to ignore such noise while focussing on the real overall trend of the share price is important for investing successfully🤓 Avoiding noise in the stock market can be challenging because the market is constantly changing, & there are always a lot of opinions, 📰 🗞 articles, & other information that can create confusion & uncertainty.
How Then Do We 🐯🐯🐯 Eliminate Market Noise To Help Us Invest Better❓
⭐️⭐️⭐️ We can eliminate market noise by identifying trend direction & strength to avoid selling when the stock is actually in an uptrend📈 or buying a stock when it’s actually in a downtrend📉 This would require charting knowledge & tools📊📈📉
⭐️⭐️⭐️ Alternatively, if we don’t have the necessary charting knowledge or tools yet, we can adopt specific investing methods that can help prevent us from making the wrong buy/sell decisions when there’s market noise😉
Identifying Trend Direction & Strength:
Isolating trend direction is best done through the use of specialised charts designed to eliminate minor corrections & deviations to show only larger trends. There are many tools that can help reduce market noise. Some examples are:
(1) Renko Charts isolate trends by taking price into account but ignoring time.
(2) Kagi Charts are designed to show supply & demand through the use of distinguished lines. New lines are created whenever a new high or low is established. By isolating highs & lows, it becomes much easier to see the larger trends.
After understanding whether a stock is moving in an upward📈 or downward📉 trend, it’s ⏰ to determine Trend Strength📈📉💪💪💪, which is best gauged through the use of indicators. The most popular indicator is the directional movement index (DMI) & its derivative, the average directional movement index (ADX).
⭐️ When the +DMI is above the -DMI, prices are moving up, & ADX measures the strength of the uptrend.
⭐️ When the -DMI is above the +DMI, prices are moving down, & ADX measures the strength of the downtrend.
⭐️ The chart above is an example of an uptrend reversing to a downtrend. Notice how ADX rose during the uptrend, when +DMI was above -DMI. When price reversed, the -DMI crossed above the +DMI, & ADX rose again to measure the strength of the downtrend.
Some 🐯🐯🐯 especially newbies might go, “But but but, I don’t have charting knowledge yet & I don’t have these fancy tools😰🙁 Does that mean I’ll make less gains or more losses❓
My answer is no but you’ll probably need to adopt specific investing methods that can help reduce the impact of market noise on your portfolio. Here’re my tips:
(1) 🕵🏻♀️🕵🏻♂️ Do Detailed Research & Buy Undervalued Companies With Strong Fundamentals Whose Stock Prices Will Eventually Go Up During A 🐂 Market❣️
➡️ You can hold these companies e.g. AAPL🍎 without having to panic-sell when there’s a downward-trend📉 or market noise😉
(2) Buy Traditional ETFs That Tracks Indexes With Low Expense Ratios❣️
➡️ It is widely accepted that indexes increased over time⏰ (see photo below) hence market noise has lesser impacts when you’re holding traditional index-based ETFs e.g. SPY & QQQ 🥳🥳
(3) Buy Dividend Stocks With A Consistent Payout History During 🐻 Markets❣️
➡️ Buying in 🐻 Markets will give you a higher dividend yield & once your dividend payouts surpass your invested capital, everything else is lifetime profit💵💵💵 For example, a 10% annual dividend yield means that you’ll get $100 for $1000 capital invested & in 10years’ ⏰ you’ll get back your $1000 capital🤗🤗🤗
$Apple(AAPL)$Fellow 🐯🐯🐯 Do follow me if you enjoy reading analytical stock research🔍 presented in a fun & easily understandable way & for 🤖AI Stock Price Predictions🔮
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As usual-🤔💭 Consider POV & Actions of investors + 👩🏻💻👨🏻💻 Research + 🗑FOMO & Greed = Investing Wisely 🤓🤗 + Accumulating Wealth 💵💰
Comments
Great great read! Ignore the noises! 2023 🚀🚀🚀🚀!!!!!!