Importance of Avoiding Revenge Trading

August 30, 2018


The market is never responsible for your loss so getting mad at the market and trying to seek revenge really doesn’t make sense. Trading is all about taking responsibility.


In the emotion of revenge trading sometimes you get crazy at the market and try to get your losses back in an emotional way instead of a rational and logical way and in this way, you are viewing the markets through your emotional filters and not are the best state to be trading this way you will make more trading mistakes.


It is difficult to avoid Revenge Trading but by practice you can overcome this emotion. You should try to accept the losses and not let your judgement in the future be clouded by your ego. You should focus your efforts and energy on analyzing what went wrong and figuring out what you can do to improve your subsequent trades.


Revenge trading is mainly driven by the fear of being wrong. It’s usually when a trader, coming from a particularly frustrating loss, decides to make up for it by being more aggressive in his/her next trades.

There are ways to recover from a bout of revenge trading. Let’s take a look at some of them:


1. Step out and clear your head after a frustrating loss. Do non-trading related activities and come back only once you’ve acknowledged that losing is part of the game.


2. Document the reasons why you lost your trade. Identifying what went wrong with your trade and focusing on improving your trading process helps lessen the feeling that the market is against you.


3. Take note of your triggers and tells on your trading journal. Do you do it when you’re trading big positions or when you got taken out by unexpected catalysts? Do you do usually bite your fingernails, snack on Cheetos, or scream at your cat before doing it? Knowing your triggers helps you prevent yourself from taking on more revenge trades.


4. Trust in your system! If you’ve tested your system and follow your trading plan 100%, then you won’t mind the losses much because you know that the end numbers will add up in your favor in the end.


5. Practice risk management. If you make risk management a habit, then you’ll have better trading discipline and are less likely to take impulsive trades. If you’re not used to it yet though, then you can start with following strict rules on position sizes and trade duration.

Remember that even the most consistently profitable traders have bad trading days. It’s all part of the game after all.


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