Noise and daily price fluctuations impede finding value in markets

 

"It is largely the fluctuations which throw up bargains and the uncertainty due to the fluctuations which prevents other people from taking advantage of them" - John Maynard Keynes 

Trading the noise for advantage is what many investors should do but don't. Whether trading trend or trading fundamental value, the core issue is learning how to address the daily fluctuations or noise to form an advantage. For trend-followers, it is a signal extraction problem, separate the noise from the underlying direction. For the fundamental value investors, the problem is separating what the market is saying through price versus what the firm may actually be worth. 

Noise can come from many sources. It can be passive rebalancing, or short-term speculation, but the result is uncertainty between price and value. Those we stay too fixated on the market price will be hurt by the fluctuation in price. The daily movement creates uncertainty which leads to delay in action and missed opportunities.