Noise Trader

Noise Trader

The term used to describe an investor who makes decisions regarding buy and sell trades without the use of fundamental data. These investors generally have poor timing, follow trends, and over-react to good and bad news.

Notes:

A hotly debated issue in behavioral finance, many investors feel that they're not noise traders and, therefore, only make well informed investment decisions.

In reality, most people are considered to be noise traders, as very few actually make investment decisions solely using fundamental analysis. Furthermore, technical analysis is considered to be a part of noise trading because the data is unrelated to the fundamentals of a company.

See also: Behavioral Finance, Efficient Market Hypothesis, Fundamental Analysis, Noise, Noise Trader Risk, Technical Analysis