medium · Market Microstructure

A 'Futile Trader' in the market ecosystem is most accurately described by which characteristic?

1. They believe they have an informational advantage but lose systematically to transaction costs and adverse selection.
2. They are arbitrageurs who failed to execute the second leg of a trade.
3. They are mandated by law to trade regardless of price, such as index funds during rebalancing.
4. They trade exclusively for entertainment and are aware of their negative expected return.

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