Many traders use various smoothing techniques to reduce the "noise," or meaningless fluctuations, in price action. Moving averages are one of the best–known smoothing tools. By minimizing noise, traders hope to improve performance by isolating the meaningful trend signal in price action.

Smoothing data can reduce market noise to a certain extent, but additional filtering of entry signals can provide even better trading results. The method outlined here is designed to filter noise from price data as well as alter entry rules depending on whether or not the market is trending. The resulting trade strategy, which will be tested on E–Mini Russell 2000 futures (ER2), and E–Mini S&P 500 futures (ES), shows how to improve a simple breakout technique using something called the "signal–to–noise ratio."