People who trade the most tend to earn the least, after costs.
Every trade has a price.
You have €10,000 invested. News flashes past. Trade or ignore? Swipe.
Every trade pays a sure cost for an unsure gain.
← Red LinesRed Line 20 of 48 The idea The numbers Where you see it Where it bends This game’s numbersHow strong the proof isAStrong proof Where it comes from
Every trade costs something: a commission, the gap between buying and selling prices, sometimes tax. Each one is small. Many of them are not.
On €10,000, a swap (sell one thing, buy another) at €10 a trade plus a 0.1% spread costs about €40. A €500 year is gone after 12 or 13 swaps: about one a month.
A study of 66,000 US households found that those who traded the most earned 11.4% a year while the market earned 17.9% (1991 to 1996).
Trading to rebalance or to fix a mistake is not the same as trading for excitement.
Barber and Odean: Trading is hazardous to your wealth (2000)The same paper on RePEcSums worked out on this page
In the US and in Taiwan, in millions of trades, the people who traded most earned least after costs.
- Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors Brad M. Barber & Terrance Odean, The Journal of Finance 55(2), 773-806, 2000
- Just How Much Do Individual Investors Lose by Trading? Brad M. Barber, Yi-Tsung Lee, Yu-Jane Liu & Terrance Odean, Review of Financial Studies 22(2), 609-632, 2009
Checked 2 Nov 2026 · How we grade
- A Strong proof: Many good studies or long official data, from different teams or countries, point the same way.
- B Good proof, with limits: Solid studies agree on the direction, but the size varies, or the data covers few places or few kinds of people.
- C Mixed proof: Some good studies for, some against, or the evidence covers only part of the line.
- D Thin proof: Mostly one book’s argument, one survey or stories. It may be wise, but it has not been tested well.
- = True by the sums: It follows from arithmetic, so no study can overturn it. We still show what real data says.
Brad M. Barber & Terrance Odean, “Trading Is Hazardous to Your Wealth”, The Journal of Finance (2000). In our words, not quoted.
See it in numbers: Costs (From Zero)
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