The trading research library: 12 studies every trader should know

Trading is full of opinions. This page is about evidence: peer-reviewed studies and official reports that every trader should know. Each entry has a plain-language summary, what it means for you, and a link to the original so you can read it yourself.

Do retail traders make money?

ESMA (2018): Product intervention measures on CFDs

Finding: National regulators' data showed 74–89% of retail CFD accounts lose money, with average losses per client of roughly €1,600 to €29,000. This led to EU-wide leverage caps (30:1 down to 2:1), negative balance protection, a ban on trading bonuses and mandatory risk warnings. For you: the odds are against beginners. Small size and risk control aren't optional. Read on esma.europa.eu

Barber & Odean (2000): Trading Is Hazardous to Your Wealth

Finding: Among 66,465 US households (1991–1996), those who traded most earned 11.4% a year vs. 17.9% for the market. Costs and overconfidence, not stock selection, explained the gap. For you: more trades ≠ more profit. Every trade must be worth its costs. Journal of Finance, 55(2). doi:10.1111/0022-1082.00226

Chague, De-Losso & Giovannetti (2019): Day Trading for a Living?

Finding: Brazilian individuals who began day trading index futures in 2013–2015: of those who persisted more than 300 days, 97% lost money; only about 1% earned more than the minimum wage. For you: persistence alone doesn't create skill. Measure your results honestly. SSRN 3423101

Does skill exist?

Barber, Lee, Liu & Odean (2014): The cross-section of speculator skill

Finding: Using every day trader in Taiwan over 15 years, the top performers of one year (less than 1% of all day traders) went on to earn positive returns after costs the next year. The gap between the best and worst ranked traders exceeded 70 basis points per day. For you: skill is real but rare, and it shows up in long track records, not lucky months. Journal of Financial Markets, 18. doi:10.1016/j.finmar.2013.05.006

Moskowitz, Ooi & Pedersen (2012): Time series momentum

Finding: An asset's past 12-month return predicted its next month's return in all 58 futures markets studied (stock indices, currencies, commodities, bonds). Trends tended to persist for about a year and partly reverse after. For you: "the trend is your friend" has academic support, as a systematic rule rather than a feeling. Later studies debate how strong it has been since 2009. Journal of Financial Economics, 104(2). doi:10.1016/j.jfineco.2011.11.003

Jegadeesh & Titman (1993): Returns to Buying Winners and Selling Losers

Finding: Stocks that performed best over the past 3–12 months kept outperforming the worst performers over the following months. This "momentum" effect is one of the most replicated findings in finance. Journal of Finance, 48(1). doi:10.1111/j.1540-6261.1993.tb04702.x

How efficient are markets?

Fama (1970): Efficient Capital Markets

Finding: Prices quickly reflect available information, so consistently beating the market is very hard. The foundation of modern finance and of index investing. Journal of Finance, 25(2). doi:10.2307/2325486

Lo (2004): The Adaptive Markets Hypothesis

Finding: Markets behave like an ecosystem: edges appear, get exploited by competitors and fade. Efficiency changes over time and across markets. For you: a strategy that worked may stop working. Keep measuring. Journal of Portfolio Management, 30. SSRN 602222

The psychology of traders

Kahneman & Tversky (1979): Prospect Theory

Finding: People feel losses roughly twice as strongly as equal gains and take more risk to avoid realising a loss. For you: this is why holding losers and moving stops feels natural, and why you need rules. Econometrica, 47(2). doi:10.2307/1914185

Odean (1998): Are Investors Reluctant to Realize Their Losses?

Finding: Individual investors sold winners far more readily than losers (the disposition effect), and the winners they sold went on to outperform the losers they kept. For you: cut losers with a stop, let planned winners reach their target. Journal of Finance, 53(5). doi:10.1111/0022-1082.00072

Gao & Lin (2015): Do Individual Investors Treat Trading as a Fun and Exciting Gambling Activity?

Finding: When Taiwan's lottery jackpots were very large, trading in stocks popular with individuals dropped by roughly 5–9%: people used trading and the lottery for the same thrill. For you: if trading feels like entertainment, you're probably taking gambling-sized risks. Review of Financial Studies, 28(7). doi:10.1093/rfs/hhu075

The size of the market

BIS (2025): Triennial Central Bank Survey

Finding: Global foreign-exchange trading averaged $9.6 trillion per day in April 2025, up 28% from 2022. Read on bis.org

How to use this research

The pattern across all of these studies is consistent: markets are real and skill exists, but costs, overtrading and psychology defeat most retail traders. The practical answers are the boring ones: small risk per trade, stop losses, fewer and better trades, and measuring your results.

Start with risk management, read is trading gambling? and trading as a profession, and download our free risk management cheat sheet.