Revenge Trading: A Disastrous Decision

Have you ever entered a trade immediately out of emotion of winning the trade after losing a trade? this is one of the situation most traders pass through either you are a professional trader or just a novice, even after having a good trading plan/strategy, you still experience some loses which can push you to do one thing you wont want to do, which is to take a revenge trade to patch things up.

Brett Steenbarger once said revenge trading is a dangerous and irrational way to trade your capital

i really agree with that, back in the days when i started learning how to trade, read trading charts (Technical analysis) and following up what is going on in the trading world, I decided to start my trading journey and invested some capital which i lost after trying to recover my small loss. The funniest thing is that most trader will never accept that they engage in this, i do have this feeling that this is like a feeling that just engulf you, you wont even know what came over you because all you will focus on is to win the trade and before you know it, you will keep losing till you lose it all.

The only thing that make you engage in this is nothing but your emotions, A friend of mine use to say , Dont trade with your emotion and that is the most important thing because emotions can cost you a lot. That act of getting angry that you lost a trade and you keep entering another trade without a proper setup all because you want to earn back what you lost, or the fact that you get greedy and decide to increase your position/lot size which increase your chance of getting wiped out if it goes wrong. Fear of not accept your loss or your friends or trading mate will laugh at you can trigger you to engage in this kind of trading.

My advice incase you find yourself in this kind of situation is to do the following

Stay away from trade for the main time, this can really save you from experiencing more loss and give you the chance to plan properly before taking the next trade. Most times, I will just off my laptop, take a nap or just grab an ice cream to cool off. After that you can come back to check out what went wrong, was the market too volatile or you miscalculate your strategy. If you can figure this out, then you will be able to restrategise.

Engaging in revenge trading most times dont really do any good but harm, you might thing you are doing great till you realise you arent, so it is best to stay away from such situations.

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