Investopedia

Continue to Site »

False Signal

Filed Under » , ,
Dictionary Says

Definition of 'False Signal'

In technical analysis, a false signal refers to an indication of future price movements which gives an inaccurate picture of the economic reality. False signals may arise due to a number of factors, including timing lags, irregularities in data sources, smoothing methods or even the algorithm by which the indicator is calculated.
Investopedia Says

Investopedia explains 'False Signal'

It is important for technicians to have a thorough understanding of the technical indicators they are using so that they are better able to detect false signals when they arise. Also, many technicians prefer to use a mix of technical indicators to function as a checking mechanism. Since trading on false signals can be extremely costly, trades are only placed when there is a consensus of technical indicators showing a future price movement.

Articles Of Interest

  1.

    Simple Moving Averages And Volume Rate-of-Change

    We teach you how to confirm buy and sell signals by comparing two very simple indicators.

  2. Stochastics: An Accurate Buy And Sell Indicator

    Find out how stochastics are used to create buy and sell signals for traders.

  3. MACD Histogram Helps Determine Trend Changes

    Learn how this momentum indicator is used to determine price action on a stock.

  4. Relative Strength Index And Its Failure-Swing Points

    Confirm your buy and sell signals with this oscillator categorized as an overbought/oversold index.

  5. Mastering Short-Term Trading

    Making money in a pressure-cooker environment is all about minimizing risk on hot picks.

  6. Trading Without Noise

    False signals can drown out underlying trends. Find out how to tone them down and tune them out.

  7. Strong Volume Gainers, Can It Continue?

    Volume is one of those indicators that gets overlooked, likely because it's shown by default on almost every chart, making it a little dull. But volume is what drives markets. Big volume jumps ...

  8. Market Summary For May 17, 2013

    The U.S. stock markets moved sharply higher this week, on track for its fourth straight week of gains, driven by ongoing improvements in economic indicators.

  9. Parabolic SAR Buy Signals

    The Parabolic SAR indicator is flashing "buy" in these four diverse stocks. Not simply relying on one indicator though, I take a look at the overall technical outlook and determine which ones ...

  10. Market Summary for May 10 2013

    Major U.S. indices moved higher this week but, given the new highs, traders should watch for retracements next week.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Fundamental Analysis [1] => Stocks [2] => SEG (Investors) [3] => SEG (Investors:Instrument-Stocks) [4] => Active Trading Fundamentals [5] => Charts And Patterns [6] => Active Trading [10] => Markets [12] => SEG (Active Traders) [13] => SEG (Active Traders:Instrument-Stocks) ) time:11ms