False Signal

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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.    
Search results for

'False Signal'

  • Should You Go With High Insider Ownership?

    http://stocks.investopedia.com/stock-analysis/2009/Should-You-Go-With-High-Insider-Ownership-VMW-ABII-TWC-DISH0311.aspx
    ... This type of high ownership will then give a false signal to value investors, and
    can't be reconciled with the original intent of the strategy. ...

  • Trading Divergences In Forex

    http://www.investopedia.com/articles/forex/07/divergence.asp
    ... If a false signal is indeed the case, stop-losses are always firmly in place – not
    so tight that you get taken out by minor whipsaws, but also not so loose ...

  • Capitalize On False Breakouts In The Danger Zone

    http://www.investopedia.com/articles/trading/10/false-breakout-danger-zone.asp
    ... True breakouts and false breakouts will possess certain characteristics that can
    be analyzed ... going to exhibit patience and wait for the market to signal us to ...

  • Anticipate Trends To Find Profits

    http://www.investopedia.com/articles/trading/06/anticipationprediction.asp
    ... The first arrow shows a false signal while the second shows a very profitable signal.
    Figure 1. This is where the power of anticipation comes into play. ...

  • Divergence: The Trade Most Profitable

    http://www.investopedia.com/articles/trading/08/price-momentum.asp
    ... If you look at the pivot the price makes below the lower trendline, this is often
    referred to as a bear trap, where the false signal draws in shorts and then ...

  • Find Forex Profit With The RSI Rollercoaster

    http://www.investopedia.com/articles/forex/08/rsi-rollercoaster.asp
    ... The only two times this setup stays out of the market is when the trader is stopped
    out of his position on a false signal or when he is stopped out at ...

  • Would a slow stochastic be effective in day trading?

    http://www.investopedia.com/ask/answers/06/daytradingstochastic.asp
    ... The slow stochastic is one of the most popular indicators used by day traders because
    it reduces the chance of entering a position based on a false signal. ...

  • Trading Systems: Designing Your System - Part 1 | Investopedia

    http://www.investopedia.com/university/tradingsystems/tradingsytems2.asp
    ... The whipsaw effect occurs when the moving average generates a false signal - that
    is, when the average drops just into range, then suddenly reverses direction. ...

  • Conference Board: Composite Index Of Leading Indicators ...

    http://www.investopedia.com/university/conferenceboard/conferenceboard2.asp
    ... Unfortunately, this rule is far too rigid to work routinely in real life: this
    three-steps-down technique has emitted at least one false signal in six of the ...

  • How are moving averages used in trading?

    http://www.investopedia.com/ask/answers/05/movingaverages.asp
    ... smoothing characteristics of moving averages are often applied to other technical
    indicators to help reduce the chance of getting a false transaction signal. ...

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