False Signal
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 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. |
Related Definitions
Articles Of Interest
-
Simple Moving Averages And Volume Rate-of-Change
We teach you how to confirm buy and sell signals by comparing two very simple indicators. -
Stochastics: An Accurate Buy And Sell Indicator
Find out how stochastics are used to create buy and sell signals for traders. -
MACD Histogram Helps Determine Trend Changes
Learn how this momentum indicator is used to determine price action on a stock. -
Mastering Short-Term Trading
Making money in a pressure-cooker environment is all about minimizing risk on hot picks. -
Relative Strength Index And Its Failure-Swing Points
Confirm your buy and sell signals with this oscillator categorized as an overbought/oversold index. -
Trading Without Noise
False signals can drown out underlying trends. Find out how to tone them down and tune them out. -
A Primer On The MACD
Learn to trade in the direction of short-term momentum. -
When To Short A Stock
Learn how to make money off failing shares. -
A Top-Down Approach To Investing
Use a global view to determine which stocks belong in your portfolio. -
Yield Investing: Dividend, Earnings And FCF
There are numerous ways to value investments, and many investors prefer a specific valuation method. Yield investing is one way to value a stock by comparing the current price to various factors. ...
Free Annual Reports