Title: Noise
Headings: Noise
Noise
What Is Noise?
Key Takeaways
Understanding Noise
Noise and Time Frames
Causes of Noise
Having a System: The Alternative to Noise Trading

Content: Key Takeaways
Noise refers to information or activity that confuses or misrepresents genuine underlying trends. In the financial markets, noise can include small price movements and corrections in that distort the overall trend. Market noise can make it difficult to determine what's driving a trend or if a trend is changing or merely experiencing short-term volatility. Understanding Noise
Noise can signify stock market activity caused by program trading, dividend payments or other phenomena that is not reflective of overall market sentiment. Dividends are cash payments that companies pay investors as a reward for owning their shares. The concept of noise was formally introduced in a landmark 1986 paper by economist Fischer Black, where he stated that "noise" ought to be distinguished from "information" and that a disproportionate amount of trading occurred on the basis of noise, rather than evidence. All trading is somewhat speculative, but noise traders are considered to be particularly reactionary, relying on trending news, apparent surges or declines in prices or word of mouth rather than the fundamental analysis of companies. Noise and Time Frames
Typically, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. The price of a security can vary widely throughout a given day, but almost none of this movement represents a fundamental change in the perceived value of the security. Day traders trade short-term movements in a security with the goal of entering and exiting a position within minutes or hours.