Key points
- In lab experiments after one night without sleep, people changed how they made risky choices. But loss aversion, how much more a loss weighs than an equal gain, did not change in either of the two experiments.[1][2]
- A study of real loan data reported a higher risk of default when sleep was likely short, especially for loans applied for in the morning.[3] But it did not study traders, and it did not measure each person’s sleep.
- In the research we checked, we found no study that directly shows lack of sleep increases trading losses or rule breaks. So whether it applies to you is something to check in your own records.
One night without sleep changes how people choose (experiments)
In the two experiments below, young healthy adults did the same money-choice tasks twice: once after a normal night’s sleep, and once the morning after staying awake all night. Each person was compared with themselves.
2011 experiment (29 people): after a night without sleep, the study reports that people’s choices shifted away from avoiding losses and toward chasing larger gains. Even so, the numbers that measured loss aversion showed no significant difference.[1]
2015 experiment (29 people; 17 in the loss aversion analysis): a night without sleep did not change people’s preferences for risk and uncertainty, or their loss aversion. What changed was strategy: when choosing between gains, people relied more on the chance of winning and less on the expected amount.[2]
What this can say: at least in lab tasks, one night without sleep can change how people make choices.
What it cannot say: it does not show that tired people take too much risk. The two experiments did not even agree on risk preferences. Both tested a full night without sleep in small groups of young, healthy people. Neither studied a few hours of lost sleep night after night, or trading.
What real loan data showed (a 2026 study)
A study published in Management Science in 2026 used application data from online personal loans in the United States.[3] It did not measure anyone’s sleep directly. Instead, it compared people living on either side of time zone borders. On the side where the sun sets later, people tend to go to bed later and sleep less. The study also used daylight saving time changes as a second check.
It reported that when sleep was likely short, borrowers had a higher risk of default, and the effect was strongest for loans applied for in the morning. The author suggests that people may rely more on quick rules of thumb and think less carefully when taking on extra credit.
What it cannot say: the people studied were borrowers, not traders. Sleep was estimated from where people lived, not from how long each person actually slept that night. It does not tell you how much one person’s short night changes that person’s decisions.
There is research on traders, but it is not about sleep
A well-known study of traders’ bodies and results is Coates and Herbert (2008).[4] They took saliva samples from 17 male traders on a London trading floor at 11 a.m. and 4 p.m. for 8 business days in a row and measured hormones. The study looked at links, not cause and effect. On days when a trader’s morning testosterone was higher than his own usual level, his profit and loss that day tended to be higher: across the 17 traders, profit and loss for the rest of the day was clearly greater on high-testosterone mornings. Cortisol, a hormone that rises with stress, moved with how much each trader’s results varied and with market volatility.
But this study did not look at sleep. It covered only 17 people over 8 days. The authors also noted that markets were calm during the study, which made the size of any effect hard to judge. It is included here to show that a study of traders still cannot tell us anything about sleep.
Summary: what we can and cannot say
Scroll the table sideways →
| Research | What it can say | What it cannot say |
|---|---|---|
| Two one-night sleep loss experiments[1][2] | How people choose can change. Loss aversion did not change in either one | They disagree on risk-taking. Ongoing short sleep and trading were not tested |
| Loan data[3] | When sleep was likely short, morning loans had a higher default risk | Not traders. Individual sleep was not measured |
| London traders[4] | Morning hormones were linked to that day’s profit and loss | Not a sleep study. Cause and effect not shown |
So research cannot tell you whether “I size up when I’m short on sleep” or “I get impulsive when I’m tired” is true for you. It may be true for some people and not for others. That is why the next step is your own records.
Check it in your own records
There are two parts: note whether you were tired or sleepy for each trade, and after a few weeks, compare tired trades with the rest.
- Mark: right after each trade, note whether you felt tired or sleepy. If you try to remember later, after you know the result, losing trades are more likely to “feel” like tired trades. So try to mark it before you look at the profit or loss.
- Split: after 2 to 4 weeks, split your trades into tired-or-sleepy and not.
- Compare: for each group, count how often you broke your rules, how many times you used a bigger lot than usual, and on how many days you hit your daily loss limit. Look at rules and limits rather than total profit, because profit depends a lot on luck in the market.
Here is an example of the counting.
Scroll the table sideways →
| Tired or sleepy | Not | |
|---|---|---|
| Trades | 8 | 24 |
| Rules broken | 4 (50%) | 5 (about 21%) |
| Bigger lot than usual | 2 | 1 |
| Days that hit the daily loss limit | 1 | 1 |
(These are made-up numbers for the example. They do not show what is typical.)
In this example, tired trades seem to break the rules more often. But 8 trades is a small number, and chance can swing it a lot (see how many trades before you trust a win rate). Tired days may also have overlapped with late-night trading or with big market moves. Even if you see a gap, don’t decide that tiredness is the cause. Treat it as a working idea, “I may break my rules more often when I’m tired,” and keep logging.
If you want to set a limit for tired days, the daily loss limit calculator turns a limit you choose into a money amount.
If the gap becomes clear, you can add one step of your own, such as “when I’m tired or sleepy, I reread my rules before I enter.” For more on rule breaking, see why you break your own trading rules. For setting a limit, see how to set a daily loss limit, and for research on putting feelings into words, see naming your emotions while trading.
In Tiltnote, you can choose “Tired or sleepy” under “This trade was…” for each trade. If it is not in your list yet, you can add it from “Popular options” in Settings, under Options for “This trade was…”, or add your own option. If you also answer “Did you follow your rules?”, you can later look at the two side by side.
About this page
This article is not a trade recommendation, investment advice or medical advice. It does not mean that better sleep will make you win. None of the sleep studies described here looked at traders. If trouble sleeping or tiredness that won’t go away continues, please talk to a doctor or other health professional. If money or trading is causing you distress, or you feel you can’t stop even when you want to, please don’t carry it alone: talk to someone you trust or to a support service where you live.
Sources
- Venkatraman, V., Huettel, S. A., Chuah, L. Y. M., Payne, J. W., & Chee, M. W. L. (2011). Sleep deprivation biases the neural mechanisms underlying economic preferences. Journal of Neuroscience, 31(10), 3712–3718. https://doi.org/10.1523/JNEUROSCI.4407-10.2011
- Mullette-Gillman, O. A., Kurnianingsih, Y. A., & Liu, J. C. J. (2015). Sleep deprivation alters choice strategy without altering uncertainty or loss aversion preferences. Frontiers in Neuroscience, 9, 352. https://doi.org/10.3389/fnins.2015.00352
- Freed, P. G. (2026). Insufficient sleep and intraday financial decision making. Management Science. Published online June 2026. https://doi.org/10.1287/mnsc.2023.04031
- Coates, J. M., & Herbert, J. (2008). Endogenous steroids and financial risk taking on a London trading floor. Proceedings of the National Academy of Sciences, 105(16), 6167–6172. https://doi.org/10.1073/pnas.0704025105