## Signal Noise Ratio

The Signal Noise Ratio indicator is a useful Vertex FX indicator to estimate the quality of market and the trend. The market consists of a primary trend (termed as signal), and whipsaws or counter trends against the main trend (termed as noise). When the markets are strongly trending, the signal is strong and the noise is weak. When the trend starts weakening or exhausting, the signal slowly becomes weak, and the noise becomes strong. The SNR indicator calculates these characteristics of the price. In the first phase, we smooth the price with a 4-bar SMA, and then calculate the InPhase and Quadrature using the Hilbert Transform. In the next step we calculate the dominant cycle period using Homodyne Discriminator.

Finally, the SNR is calculated based upon the Daily Range (High - Low), converted to logarithmic value and expressed as decibels.

NOTE - This indicator should not (cannot) be used by itself. It should be used in conjunction with other indicators.

Inference - When the SNR has bottomed out below zero and is gradually rising, we should stay in the trade (as decided by the trader from other indicators). When the SNR has peaked out and starts falling, it is recommended to exit the trade. (It is not recommended to reverse the position). The direction of the trade must be determined by other trending indicators, and not by the SNR indicator.

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Posted By donaldperkins : 12 August, 2020
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