Noise Traders are investors who trade on signals they believe will generate better than random returns. This belief is not well founded, however, as the concept of noise trading comes from the notion that price action has “noise” which is unrelated to sound analysis about security value. Some people believe this noise can be used to predict future trends and make profitable trades; however, it often leads to losses instead.There have been numerous studies conducted in an attempt to explain what causes these seemingly random price movements but none have been able to conclusively prove anything yet. Many attribute them simply being due market participants making irrational decisions based on emotions rather than fundamentals or technicals of a stock or asset class; while others suggest there may be some form of predictive power in these noisy data points after all if one could properly interpret them correctly over time .In conclusion, noise traders are those who take risks by attempting to use seemingly random patterns for investing purposes without having any real evidence that their strategy will pay off in the long run. While it might lead lucky individuals towards short-term profits at times , ultimately such strategies are unlikely lead anyone towards consistent success over time since predicting markets accurately remains impossible even with sophisticated algorithms and advanced analytics tools available today.
