Noise Trader

A market participant who makes trading decisions based on incomplete information, rumors, emotions, or irrelevant signals rather than fundamental or rigorous technical analysis. The concept was formalized by economists Fischer Black and later by Shleifer and Summers, who argued that noise traders can actually influence prices and create persistent mispricings. While professional traders often dismiss noise traders as "dumb money," their collective activity generates the liquidity and volatility that make short-term trading profitable.