You’ve just had a bad trade. You’re feeling frustrated and angry. Maybe you feel like you need to take revenge on the market. But revenge trading will only lead to more losses and more significant problems down the road. Here’s how to prevent yourself from trading in revenge and manage your emotions instead.

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Revenge trading is a natural and emotional response when a trader suffers a significant loss. Before taking time to think about their next move or looking at their strategy, they enter another trade after their big loss.

The idea is to recover from the loss immediately. The thinking behind it is by putting on another trade (which is expected to be a winning trade) the losses can be recovered quickly.

But as you already know, markets are not easy to predict.

And the expected winning trade would most likely turn into a losing trade. Only bigger than the one the trader is trying to recoup.

Revenge trading is when you try to force a trade in order to recover from a previous loss. Most of the time, traders who do revenge trade have been in a good run until a big loss sets them back.

According to Steenbarger, “Revenge trading is caused by wrath as you are angry that you lost and have the lust to make it all back quickly”.

Revenge trading is never a good idea

When you’ve just had a losing trade, it’s easy to feel you need to take revenge on the market. After all, the market just “took” your money. But revenge trading is never a good idea. It will only lead to more losses and more significant problems down the road.

Revenge trading usually leads to impulsive decisions: When you’re angry, you’re not thinking clearly. You’re more likely to make impulsive decisions that you’ll later regret. That’s why taking a step back and calming down after a loss is essential. Resist the urge to immediately jump back into the market to get your money back.

Revenge trading can cloud your judgment: It’s essential to assess your trades objectively. But when you’re revenge trading, your emotions will cloud your judgment. You’ll be more likely to make rash decisions without fully considering the consequences.

Revenge trading can lead to over-trading: If you’re constantly trying to get revenge on the market, you’ll end up trading too much. It can lead to even more losses and leave you feeling even more frustrated. Sticking to your trading plan and only trading when it makes sense is essential.

Revenge trading can exhaust your account quickly: Revenge trading is often accompanied by recklessness. Traders out for revenge are often more willing to take risks than they would typically be. It can lead to significant losses and quickly exhaust your account.

Revenge trading can destroy your long-term success: If you let emotions control your trading, it will only lead to problems. Trading should be approached as a business, and emotion should be kept out of it as much as possible. If you allow revenge trading to become a habit, it will ultimately destroy your long-term success as a trader.

So how do you prevent yourself from falling into the trap of revenge trading?

Here are some tips:

Take a step back after a loss: Don’t immediately jump back into the market after a loss. Take some time to calm down and think about what happened. Why did you lose money? What can you do differently next time?

Analyse your trades objectively: Don’t let your emotions cloud your judgment. Try objectively assessing your trades, and don’t be afraid to take responsibility for your losses. It’s okay to admit that you made a mistake – we all do from time to time. The important thing is to learn from your mistakes and move on.

Stick to your trading plan: Don’t deviate from your trading plan just because you’re feeling angry or frustrated. Remember, stick to your plan and only trade when it makes sense.

Don’t be afraid to take a break: If you’re feeling angry or frustrated, it might be a good idea to take a break from trading. It will give you time to calm down and clear your head. You can always come back later when you’re feeling more level-headed.

Seek professional help if necessary: If you find that you can’t control your emotions and you’re constantly making impulsive decisions, it might be time to seek professional help. There’s nothing wrong with getting help from a therapist or counsellor. It can be very beneficial. Trading is a tricky business, and it’s essential to do everything possible to set yourself up for success.

Conclusion

Revenge trading is a dangerous trap that many traders fall into. If you’re feeling angry or frustrated after a loss, take a step back and think about what you’re doing. Don’t let your emotions control your trading decisions. Please stick to your trading plan and only trade when it makes sense. And if you can’t control your emotions, seek professional help.

Winning traders do not hesitate to risk money when they see a genuine profit opportunity based on their market analysis and trading strategy. However, they do not risk money recklessly. Always aware of the possibility of being wrong, they practice strict risk management by putting small limits on their losses.