No signal is deterministic — define what confirms it and what proves it wrong.
| Concept | Explanation | |---|---| | Confirmation | Independent evidence that supports the same interpretation, such as trend, momentum, and volume aligning. | | Invalidation | A predefined condition showing that the interpretation is no longer supported. | | False positive | A signal occurs but the expected move does not follow. | | Whipsaw | Repeated signals reverse quickly in a choppy market. | | Signal decay | A signal loses relevance as time passes or market conditions change. |
Good signal reading asks both what would confirm the interpretation and what would prove it wrong. Without invalidation criteria, a signal can become a story that is endlessly reinterpreted.