The market is full of noise these days. Everywhere you look, there’s another “expert” telling you to buy this or sell that based on some tiny price movement that ultimately means nothing.
Here’s the truth: Most of what you see in day-to-day market action is just random nonsense. And reacting to it is probably costing you money.
The Random Noise Trap
I’ve been watching other student traders for decades now, and I can tell you that one of the biggest mistakes I see is overreacting to insignificant market fluctuations. You know what I’m talking about — those little dips and spikes that get everyone all worked up but ultimately go nowhere.
Look, the market is going to do what it’s going to do. Sometimes a 1% drop is the beginning of something bigger, but most of the time? It’s just random movement that means absolutely nothing.
The key is having a system that helps you tell the difference. And that’s where my favorite technical tool comes into play.
The 8-Day EMA: Your Market Truth Detector
For years, I’ve relied on the 8-day exponential moving average (EMA) to cut through market noise, especially during volatile periods like we’re experiencing now.
Here’s the simple truth — when the market consistently trades above the 8-day EMA, we’re in an uptrend. When it’s below, we’re in a downtrend. It’s that simple, that straightforward.
But there’s a crucial detail most traders miss: You need to confirm these signals during regular market hours. I’ve seen countless traders jump the gun based on premarket action, only to get burned when the regular session opens.
For example, let’s say the S&P 500 appears to fall down to touch the 8-day EMA in premarket trading, but during regular hours it maintained its position above this critical level — confirming we’re still in an uptrend despite all the nervous chatter.
This simple indicator has saved me from countless fake-outs and kept me on the right side of major trends when everyone else was getting whipsawed by market noise.
Want to improve your trading results immediately? Start plotting the 8-day EMA on your charts today, and resist the urge to react to every little market hiccup. Focus on the bigger picture, and you’ll be amazed at how much clearer your trading decisions become.
I hope that helps!
Roger Scott
Roger Scott Trading
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