Did value of ratio between informed and uninformed traders at market, making difference to profitability of short-term directional trading on that market?

My guess is yes and better play short-term directional on market when is more uninformed traders in relation to informed, because at this market spread will be maintained by market makers on lowest value to possible profits/short-term volatility.

That may be correct or not, maybe someone have other point of view on this question.

EDIT: To simplify, It's possible to make a guess that specific markets can be better environment for play short-term directional strategy based on estimated ratio between uninformed and informed traders at them? And why?

  • $\begingroup$ I can't really understand the question, could you clean it up a bit? $\endgroup$ Commented Jun 14, 2014 at 6:23
  • $\begingroup$ I agree that this questions is not clear. I voted to close it if it is not improved. $\endgroup$
    – Richi Wa
    Commented Jun 16, 2014 at 7:40

1 Answer 1


I'm still not entirely certain exactly is the question you want answered.

If you are you asking is "uninformed" flow more valuable than "informed" flow, then the answer is an emphatic yes otherwise funds like Citadel wouldn't pay so much for it. See here for details

The only issue to consider is that will you be able to get a piece of the "uninformed" flow? With most of the brokers selling their flow these days its unlikely that you'd be able to see any of this flow before a fund like Citadel has taken advantage of it.

  • $\begingroup$ Not sure this warrants a complete "answer", but I would point out that there are certainly markets where it is not possible to sell out retail (uninformed/noise) order flow, because local regulations obligate brokers to route all trades (other than some large-in-size exceptions) through the central order books. I'm guessing that these markets would qualify as "better" for short-term directional trading in that sense, though this of course ignores potential execution cost variation (direct, spread, et cetera). $\endgroup$
    – afekz
    Commented Oct 21, 2014 at 15:11

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