What is "noise trader"

n. (context finance English) One who trades financial products (such as stocks) not based on fundamental analysis.

A noise trader also known informally as idiot trader is described in the literature of financial research as a stock trader whose decisions to buy, sell, or hold are irrational and erratic. The presence of noise traders in financial markets can then cause prices and risk levels to diverge from expected levels even if all other traders are rational.

In finance, noise obtained a formal definition in a 1986 paper by Fischer Black: "Noise in the sense of a large number of small events is often a cause factor much more powerful than a small number of large events can be."