Noise

AAA

DEFINITION of 'Noise'

Price and volume fluctuations in the market that can confuse one's interpretation of market direction. Used in the context of equities, it is stock market activity caused by program trading, dividend payments or other phenomena that is not reflective of overall market sentiment. Also known as "market noise".

BREAKING DOWN 'Noise'

In general, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. Noise traders attempt to take advantage of market noise by entering buy and sell transactions without the use of fundamental data.

RELATED TERMS
  1. Bear

    An investor who believes that a particular security or market ...
  2. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  3. Noise Trader

    The term used to describe an investor who makes decisions regarding ...
  4. Market Sentiment

    The overall attitude of investors toward a particular security ...
  5. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  6. Noise Trader Risk

    A form of market risk associated with the investment decisions ...
Related Articles
  1. Active Trading

    Trading Without Noise

    False signals can drown out underlying trends. Find out how to tone them down and tune them out.
  2. Forex Education

    Confirm Forex Momentum With Heikin Ashi

    Heikin Ashi smooths trends and makes them easier to identify.
  3. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  4. Options & Futures

    Maximize Profits With Volatility Stops

    Find out which type of volatility stop fits your trading objectives.
  5. Options & Futures

    Testing Point-And-Figure Patterns

    Learn the patterns that will help you pinpoint and profit from breakouts.
  6. Options & Futures

    Gauging Major Turns With Psychology

    Knowing what the market is thinking is the best way to determine what it will do next.
  7. Charts & Patterns

    A Look At Kagi Charts

    This relatively unknown tool could help you find an asset's trend faster.
  8. Active Trading

    Multiple Time Frames Can Multiply Returns

    Short-term and intermediate charts complement the underlying trend and refine entries and exits.
  9. Term

    What is Liquidity Risk?

    Liquidity risk is the risk of being unable to sell an asset fast enough to avoid loss.
  10. Investing Basics

    What is a Settlement Date?

    A settlement date is the day a security trade must be settled.
RELATED FAQS
  1. Are exponential moving averages more effective than simple or weighted moving averages?

    An exponential moving average (EMA) uses an exponentially weighted multiplier to give more weight to recent prices, which ... Read Full Answer >>
  2. Do noise traders have any long-term effect on stock prices?

    There are two theories that are used to describe how securities are priced in the stock market: the efficient market hypothesis ... Read Full Answer >>
  3. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  4. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  6. What are the requirements for being a Public Limited Company?

    The requirements for an entity to be considered a public limited company (PLC) include registration requirements, establishing ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!