8 Tips To Stop Anger and Revenge Trading

Making “anger” trades after either having a bad loss or making a bad decision is known to every trader, a beginner and a pro. As soon as emotions get a grip of a trader, useless trades are almost inevitable. Anger and revenge trades are so fatal that can wipe out a forex trading account within minutes. How to identify what triggers trader to emotional trading and what is the way to get out of self-destruction pass immediately with a minimal losses? 

Have you ever had the experience of being hijacked by your emotions while trading, to the point where you end your day in a daze wondering who was the stranger who took all those impulsive and reckless trades? If so, you are most definitely not alone. You are likely one of the large percentage of traders who regularly succumbs to impulsivity and is look for a solution to put a stop to revenge trading or trading on tilt.

Emotional trades in forex happen often and whenever trader looses the control, the account gets wiped out fast.  Even with reliable trading strategy, strict discipline and good money management it is easy to become emotional after making bad choices, start increasing size to make it back, moving stops, averaging down, creating excuses to continue trading, look for opportunities that are not even there.

The biggest problem of all is when it comes to crazy trading, you don’t even know you are doing it! So it is up to you to come with a right technique to snap out of it.

Understanding Revenge Trading

Revenge trading is a psychological trap that many traders, particularly beginners, often fall into. Following a series of losses, a trader might feel a burning desire to recover their losses quickly, which can lead to risky, impulsive decisions. This emotional reaction, driven by a sense of vengeance against the market, disregards risk management rules and often results in even more significant losses. Traders can view the market as something which has taken their money and think it is unfair.

Know the Warning Signs

The most important thing for traders to know regarding this syndrome (revenge trading) is that it’s very common. As mentioned above, it’s an emotional state that just about any trader might fall into without the proper warning and avoidance systems in place. Once aware of these pitfalls, the next thing a trader has to do is know how to avoid them.

If, for some reason, a trader knew about revenge trading but couldn’t avoid falling into its grasp, they need to cut their feelings and recognize their unhealthy footing in their portfolio immediately.

Let’s say, for example, you’re suffering a sequence of losses, you’re going away from making your daily goal, and you’re really stressed. Take a step back and ask yourself, “am I getting into an emotional state where it’s of the utmost importance that I make up all of my losses as quickly as possible?” if the answer is yes, you might be infected with the revenge trader syndrome. Our professional advice is to stop everything and make it quick.

If you’re in it, you’re probably the type of trader who would fail to admit that you’re capable of taking losses. You might fail to understand that the market doesn’t care about what you’re doing. Trying to succeed in the market might have become a stronger impulse than following the market prudently and making reasonable decisions based on what you study.

Most importantly, your concept of losing trades is equivalent to failure. Know that taking losses according to your plan is not a failure. Persuade yourself that this is the right way and you can’t force yourself. In case you missed it, here is a great guide for how to embrace such a mental state.

Emotions involved

In general, these reasons can be summarized into:

  • Anger – In anger, a trader is generally disappointed that they made a big loss and so they want to recoup their initial losses.
  • Greed – As you probably know, greed is one of the key sentiments in the market. Therefore, traders often revenge trade as they try to make more money.
  • Fear – Traders revenge trade because of the overall fear in the market. Precisely, there is the overall fear of making a big loss. For example, if you make most of your money trading and you make a big loss, fear can push you to revenge trade.
  • Shame – Some people revenge trade with the goal of avoiding shame. This is mostly common when you are trading as part of a team.

How to stop anger and revenge trading in forex?

 Below are tips on how to stop the self-destruction before it actually began: 

Take a Break

Taking a break from trading is one way to avoid revenge trading. You may need to take a break after making a series of losing trades. Taking a break helps you learn what went wrong or if it was just the market being the market.

Only get back into active trading when you think your mind has healed, and you are in your best mental state. You must also always know that losses are an inevitable part of trading.

Always Stick to the Plan

The chance of trying a revenge trade is minimal if you consistently stick to your trading plan. If you have a proven trading strategy, trading according to it should only produce the results you expect or at least a form of consistency to keep you in the game for a long time. So, when you make a loss it would only be an expected percentage of your wallet balance. Your profits would also be within the expected range.

It is normal for humans to want to recover a loss immediately, but trying to do that in the market is somewhat dangerous and leads to losses. Trades should only be executed based on predetermined conditions that you must have documented in your trading plan. Anything outside of that makes you lose discipline since nothing is guiding your decision-making process.

Manage Risk

As momentum traders we are always looking for that stock that has the potential to move 50-100% or more.

Unfortunately new students often mismanage risk on these trades by taking too much size, or by chasing the momentum without understanding the proper stop.

The solution to this bad habit is to use smaller size on stocks trading in a large range and to always understand your max loss and stop loss price.

Decrease Size

Make a substantial decrease in size traded. This way you will be able to take your mind off serious trading for a while and become sane again.  Give yourself time and go back to appropriate size trading only when you are truly ready. 

Add Money You Didn’t Win

Consider putting the amount equal to the winning trade you didn’t take in your forex account. To see the money in the account will make you feel better and think rationally again. 

Add Amount You Lost

If you lost a trade, you might want to add the amount you have lost back to the account. It is surprising how easy it is to become normal again when you don’t see your account with losses. 

Learn to Accept Losses

There is no holy grail to trading. The holy grail is having a proven trading strategy and following the strategy with proper risk management. Accepting that no matter how good your trading strategy is, you will have times when you make losses will help you approach the crypto trading market better.

Use Visual Effects!

Make a poster or a note which will help you to remember not to make irrational decisions after bad trades. The note will help you to stay rational, take only the trades that you fully understand and pass on all the rest. 

Trade With Reason and Review

Psychology is one of the most important factors influencing success or failure in forex trading. Make sure that you have right psychological reasons to enter a trade. 

Be Military Precise

Be disciplined. In fact, be army disciplined! It is important to enter the forex market only when all your criteria are met. This way emotion has nothing to do with your decision to enter a trade. 

Confess and Talk It All Out

Confess about your losses to someone nearby or even over the net, a fellow trader or someone who can understand your pain. Talking helps to free your mind from the negative thoughts about loss and bring you back to reality and objectivity.

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