Revenge trading is one of the main reasons for a trade failure. Revenge trading meaning when a trader tries to recover his previous losses instantly and makes random decisions. It is the most dangerous and illogical way to use your capital in trading. It is the most familiar trading mistake. Most of the traders did revenge trading at least once in their lives or still doing it. While many traders do not try to admit this. It is the most common mistake for the traders and thus most of the trader ends their trading journey within the first year. They used all of their capital because of revenge trading. That’s why they can not survive in the financial market for a long time.
In this article, we discuss what is revenge trading. What factors trigger revenge trading? What is best effective ways to overcome revenge trading and so on.
What is Revenge Trading?/ Revenge Trading Meaning
When a trader experiences a substantial loss, revenge trading meaning is a normal and emotional reaction. After their massive loss, they entered another trade without thinking about their next step or reviewing their approach. The goal is to recover from the loss as soon as possible. The reasoning is that by entering another trade (which is believed to be a winning transaction), the losses can be swiftly recovered. However, as you are aware, markets are difficult to predict. And the projected winning trade would almost certainly become a losing trade. Only one larger than the one the trader is attempting to recuperate. When you try to push a trade in order to recover from a past loss, this is known as revenge trading. Most traders who engage in revenge trading have been on a roll until a large loss knocks them off.
What Factors Trigger Revenge Trading?
Revenge Trading means not only taking trades because of anger. A lot of emotions like anger, greed, fear, shame, impatience, and FOMO are the main reasons behind revenge trading. Revenge trading is not only a common problem for new traders. But also for professional trades who have been trading for a decade. Because it is hard to control your emotions every time. Cause we humans are emotional beings. And that’s why it makes revenge trading so Dangerous.
Anger
Anger will bring no good for you not only in trading but also in real life. When a trader loses a trade he thinks that the market intentionally makes him lose. He takes it personally and wants to take revenge on the market. He becomes very angry and makes wrong decisions which triggers revenge trading.
Greed
Trading is instant money. Generally, other investment sectors need much time to return your capital with profit. In some cases 6 months to 1 year also. But in trading, you can profit in a very short period of time like 10 minutes to 1 day. That’s why a lot of new traders can not control the temptation of getting more money. And for greediness, they trade again and again. After being one or two back-to-back losses. They started doing revenge trading.
Impatience
You have to understand a simple term patience is the key. In most cases, traders get impatient and panic when they lose a trade. They wanted to recover the lost money instantly. Then what do they do? They double or triple their lot size and then trade. That is a kind of revenge trading.
Fear
However, fear is not directly related to revenge trading. Fear is related to FOMO (fear of missing out). But sometimes because of FOMO traders think they miss a great Opportunity (which is really not). They become curious and panic. Then they take a revenge trade because they think the next opportunity will never come (which is not true).
How To Overcome Revenge Trading?
Given the potential consequences of revenge trading, it is in every trader’s interest and benefit to put a stop to it. Here are the five most successful techniques to combat revenge trading, according to many trading coaches and trading psychologists who have worked with thousands of traders.
1. Take a Break
However, it is difficult to take a break after a losing trade. But if you want to become a successful trader and stay in the market in the long term. You have to take a break for a short time from trading. Take a break for one or two days. Do not trade at all. But you can adjust your strategy. Upgrade it. Finding its mistakes and increasing its win ratio.
2. Stay Disciplined
Motivation will keep you going but discipline will keep you growing. If you do any work with discipline. It doesn’t matter if it’s trading or what. You will succeed. No matter what. Stay disciplined. Make a trading plan. Follow it strictly no matter what happens. You will grow every day and thus you can overcome revenge trading.
3. Don’t Change The Plan
After losing a couple of trades. Most traders are searching for new strategies. And then another. And again another. But never stick to one plan. It basically destroys the mental state of a trader. Subconsciously a trader loses self-confidence and takes trades like a gambler. They do martingale after losing a trade. Martingale is a good strategy if you use it with a plan. Otherwise, nothing is worse than a martingale. No plan works 100% all the time. So be realistic
4. Accept The Loses
Those who accept the losses are the real winners and those who don’t try to accept the losses are real failures in trading careers. When you lose a trade. Respect the market and leave for that day. The market has no sympathy for you. If you respect the market. The market will give you a bigger return than the loss.
5. Control what you can
Yes always control what you can. You can control your emotions. So you must control it. Cause you can’t control the market. In this world, the only thing that you can control is your mind. But the difficult thing that you can control is also your mind. So it may be difficult but you have to do it. Another thing that you have to control in the financial market is your losses. You can choose how many losses can you take. But you can not choose the amount of profits you take. The market will decide this. So Let the market decide it for you. You just control what is in your hand. Profit is not in your hands. Right.
Conclusion
Based on the experiences of highly regarded trade coaches and trading psychologists, this post offers some realistic and step-by-step steps to combat revenge trading. If you are battling with revenge trading and wish to control it, these tips can help you get started. Hopefully, guys can overcome revenge trading. Revenge trading meaning is to control all of our negative emotions. Let me know what you guys think about revenge trading and how you overcome this problem or what are you facing right now.