How to avoid false signals?

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How to avoid false signals?

Postby User » Fri Jul 03, 2009 2:53 pm

Forum transfer: Submitted by Tommy on September 18, 2007 - 22:11.

Hi,
I'm looking for an answer that bugs me ever since I started trading Forex.
How to avoid false signals???

How do I determine that this time a signal is a true one and won't be gone/cancelled as the time moves on?

Thanks a lot for your help.
User
 
Posts: 376
Joined: Wed Jul 01, 2009 7:08 pm

Re: How to avoid false signals?

Postby User » Fri Jul 03, 2009 2:53 pm

Forum transfer: Submitted by Forex trader on September 22, 2007 - 12:51.

Tommy,
that's what filtering the signals is all about. In case you are using MACD or EMA cross or Stochastic - you must be familiar with their TRICKS, when one hour you can see lines crossing and then another hour they uncross...

This is a trap many newbie traders fall in. What is a solution?

Don't rush into the trade once you've got a signal.

1. Wait for a current candle to close.
2. Add indicator that does not use lines cross or signals that may change itself over the time, for example, Parabolic SAR (it can still change its dot, but it is rather an exception than a rule).
3. Add the same indicator with wider period.
4. Look back at larger time frames.
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Re: How to avoid false signals?

Postby User » Fri Jul 03, 2009 2:54 pm

Forum transfer: Submitted by Beyond on September 23, 2007 - 12:56.

I like another filtering options:

1-st of all I use heikin-ashi candles - awesome bars to se the trend clear.
Then also I draw trend lines and if, for example I want to enter on the trend change, I wait for my trend line to be crossed.
In the meantime I also monitor my indicators, like Stochastic and EMAs. Then when I've got my trend line breached and my indicators tell me to enter, I'm confident my chances to win are high.

Good luck!
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Re: How to avoid false signals?

Postby User » Fri Jul 03, 2009 2:54 pm

Forum transfer: Submitted by User on September 26, 2007 - 12:59.

To avoid false signals on the trend change never trade a single top or a single bottom. Patience and cool head should be your friends while you wait for a retest and appearance of the second top or bottom.
Once you've got double top or double bottom pattern - go for it as it is the best filtered entry ever. Plus your stops will be maximum tight - just slightly away from the tops or bottoms.
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Re: How to avoid false signals?

Postby User » Fri Jul 03, 2009 2:55 pm

Forum transfer: Submitted by Emmanuel on September 27, 2007 - 12:39.

I have observed that when you get alert from your system you can confirm using:

Both recent and previous projected Trend lines break on 15M.
Pivot points retests and breaks.
Fibonacci retests and breaks.

I'm also a newbie. So i'll welcome corrections and ideas on my suggestions.

Lastly, Patience! Patience!! Patience!!! Most of us newbies are guilty of backing out too early because of fear later to see our strategy eventually coming to win. Always give your system a little of patience that will be in harmony with your money management before you conclude it's a false signal.

Emmanuel
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