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Quantitative Finance · Glossary

What is Informed trader, noise trader?

Also known as: informed trader · noise trader

Definition 4.4 Microstructure and Execution · Chapter 4 — Why There Is a Spread

An informed trader knows something about the value that the liquidity provider does not and trades on it. A noise trader (liquidity trader) trades for reasons unrelated to the value (a fund flow, a hedge, a rebalancing) and carries no information.

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