Revenge trading means trading in a situation when you have suffered a loss earlier and you try to recover that loss as quickly as possible. This is a very dangerous mental state in which the trader trades repeatedly without thinking, getting carried away by his emotions. This kind of trading often leads to more losses. It is very important for every trader to understand and avoid it.
Why does revenge trading happen?
When a trader suffers a loss in a trade, a restlessness arises inside him. He wants to recover that loss as quickly as possible. In this feeling, he immediately takes the next trade without understanding the market properly. Many times this trade happens without any plan. This process is called revenge trading. The main reason for this is emotional imbalance, impatience and inability to accept loss.
How to control emotions?
The biggest reason for revenge trading is our emotions. Until we control our anger, frustration, fear and greed, we will keep getting trapped in this trap. To keep your mind calm, do meditation, focus on breathing and ask yourself before every trade why you are taking this trade. If the reason is only the previous loss, then this trade should not be taken. Consider every trade as a separate event and do not associate the past with it.
Follow the trading plan
Every trader should make a solid trading plan. This plan should decide when to take the trade, how much amount to take, and when to exit. When you have a definite plan, you do not take emotional decisions. If you have made a loss and it comes within your plan, then accept it and take the next step thoughtfully. Never trade outside the plan, no matter what the situation is.
Learn to accept loss
The most important part of trading is accepting loss. Not every trade can be profitable. If you get sad after every loss and try to get it back immediately, it will increase the loss further. So look at loss as a lesson and think about what you learned from it. When you teach your mind that loss is a part of trading, then you start avoiding revenge trading.
It is important to take a break
If you have made a huge loss in a trade, do not immediately go into a new trade. At that time your mind is not calm, and you can take wrong decisions. In that situation, it is better that you take a break for some time. Drink a cup of tea, go for a walk or stay away from the trading screen for some time. This will stabilize your mind and you will be able to take better decisions.
Start again with small trades
When you return to trading after a big loss, you should avoid big trades. Start with small trades. This will gradually boost your confidence and you will be able to trade without pressure. Small trades also have less risk and the emotional impact of losses is also less.
Keep a record of every trade
A good trader is one who keeps a record of every trade. Keep writing when, why and how you traded. This will help you understand in which circumstances you did revenge trading and how it can be avoided in future. This habit will teach you discipline and prevent you from repeating mistakes in future.
Take care of mental and emotional health
Trading is not only a game of the mind but also of mental balance. If you are facing any family problem, stress or fatigue, then do not trade on that day. You are able to take the right decision only when your mind is calm and stable. Therefore, keep checking yourself mentally from time to time and take a break if needed.
Decide how much loss you can bear in a day
Set a ‘daily loss limit’ for every day. This means that you decide how much loss you can bear in a day. If that limit is crossed, stop trading that day. This will prevent you from repeatedly trading without a plan and will protect your money.
Learn from experience, not revenge
Every loss brings you an experience. If you look at every loss as a revenge, you repeat that situation again. But if you learn something from it – like the entry point was wrong, or the stop loss was not set – then you will become a better trader in the future. Learning is the most important thing in trading.
Always use stop loss
Stop loss is a tool that protects you from big losses. If you put a stop loss in every trade, then you do not get emotionally attached to your money. The advantage of this is that the loss remains within the set limit and you do not feel the need to suddenly take a revenge trade.
Understand the difference between confidence and arrogance
Many times traders think that they can beat the market. This thinking comes from ego, not confidence. Confidence means you have prepared, you have done your research and now you are trading according to the plan. But if you think “I did wrong last time, now I will do it right”, then this is ego and it is the beginning of revenge trading.
Don’t make trading a gamble
The main reason for revenge trading is that you have to be careful and do not take risks.
Another reason is considering trading as gambling. People think it is a shortcut to make money. But the reality is that it is a skill that requires time and patience. If you play it like gambling, then in the end your balance will be zero.
Give time to life outside trading
Trading is a part of your life, not the whole life. When you are immersed in it, every loss takes a toll on you. But if you have family, friends, hobbies, or something else that gives you happiness, then the ups and downs of trading do not affect you mentally as much.
Conclusion:
Revenge trading is one of the biggest psychological traps that can ruin even the most skilled traders. The desire to quickly recover losses often leads to emotional decisions, impulsive trades, and even bigger losses. To become a successful trader, it’s essential to develop discipline, control your emotions, and treat trading as a long-term skill—not a gamble.
READ ALSO :Complete Guide to Risk Management in Trading: Protect Your Capital Like a Pro
Disclaimer:
This content is for informational purposes only and does not constitute financial or investment advice. Always consult a qualified financial advisor before making any trading decisions.
