Forex Dictionary Terms

Noise Trader

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Definition – What does Noise Trader mean?

A noise trader is a currency trader who makes trades purely on technical signals or market activity. The term noise trader comes from the stock trading world and is usually used to describe an investor who buys a stock without looking at the fundamentals. In forex trading, however, the majority of traders are noise traders in that they trade using technical analysis and trend reading tools.

ForexTerms explains Noise Trader

There are fundamental approaches to forex trading that put a lesser value on market activity, but even fundamental forex traders sometimes make decisions using technical tools. In reality, the forex market is largely driven by opinions on the strength of different currencies because even the fundamental data available – economic reports and such – cannot give an absolutely accurate picture of the economy underlying the currency. Consequently, some guesswork is needed to make fundamental trades. In contrast, the constant market price action is what it is – a collection of real-time reactions by market participants to past price action.

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