Process and psychology
Too many trades
The most active traders earned less than the least active in a large study of households.
Well documented
Found repeatedly in peer-reviewed work or regulator data.
Documented in equity accounts.
What it is
In records of about 66,000 households, the most active fifth earned notably less than the market. Trades cost money, and each is another chance to act on impulse.
What it suggests
A plan can cap trades per day. Fewer, better-matched trades are a claim the Exchange can check against the trader's own record.
How to check it
Count trades per day and compare results on busy and quiet days.
Common mistakes
- Adding trades to chase a target of opportunities per day.
Sources
- Barber and Odean (2000), Trading is hazardous to your wealth, Journal of Finance 55(2) (citation and headline finding only)
Related lessons
Written in our own words. Education only, not financial advice.