Let's Code the Signal-to-Noise Ratio for Time Series
Separating the Meaningful from the Market Static
In markets, not everything that moves matters.
A price spike doesn’t always mean momentum. A reversal doesn’t always mean the trend is broken. Trading is filled with noise—random fluctuations, false signals, overreactions, and algorithmic twitchiness that can lure you into bad trades.
That’s why one of the most important questions in trading isn’t just “where is price going?” but rather: how much of this price action is real?
This is where Signal-to-Noise Ratio (SNR) comes in.
What Is the Signal-to-Noise Ratio?
The SNR measures how much useful information (signal) exists compared to irrelevant background fluctuations (noise). In trading, we adapt this idea to gauge how much structured, directional movement exists in a price series compared to random, choppy movement.
In plain terms:
High SNR = Price is moving with conviction (trending).
Low SNR = Price is moving erratically (sideways, noisy, volatile without direction).
Why It Matters
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