Forex Basics

Reasons to Avoid Revenge Trading

Revenge a dish best served cold. That is the old movie quote, but it doesn’t quite have the same meaning when we look at revenge in relation to forex trading. We all have losses, it is a major part of trading and something that you will experience throughout your trading career, no matter how good you are, you will have losses and most likely lots of them. What we don’t want to do when we do have a loss is to try and revenge trade, to try and win that money back, throwing all risk management out the window, and simply hoping that the next trade wins.

Revenge trading is a situation where your emotions are getting the better of you, they are taking over your thought process and you are trading based on your feelings rather than the markets and your analysis. It takes you away from your rules, it takes you away from your system, and shows a lack of discipline within your trading. We all get these feelings though, the important thing is that you do not act on them, remind yourself why you are here and avoid putting on those revenge trades.

When you decide to trade based on your emotions, you are pretty much just gambling, there is no real reason to why you are selecting certain trades, simply the fact that you want to make back any of the money that you previously lost. The usual form of revenge trading is when you make a trade take a loss, you then place another trade, usually in the same direction but this time with a larger balance size. We have set out some examples of typical revenge trades below.

Jack has placed a trader with $100 based on his analysis, it goes the wrong way and he is currently losing about $95 out of his $100 bet (it has a stop loss placed at $100 loss). Looking at the markets, he still believes that his initial analysis was correct, due to this, he decided to extend the stop loss down to $250, a few hours later that stop loss gets hit and he has now lost $250 instead of the original $100. This form of revenge trading simply creates more losses, he did not want to lose that initial $100, even though it was calculated into his strategy, and so instead he has over doubled the loss incurred.

Sarah has placed a $100 trade, it goes completely the wrong way and she is stopped out losing the entire $100. She is annoyed and so wants to try and win that money back, so she decides to place an additional trade, this one is for $200, double the original amount. Once again it goes the wrong way, this fuels her frustration and so a third trade goes on, this time for $400, another double of the amount. This can continue until going bust. Even if the second trade went the right way, it is often closed once the original amount is recovered, it is still a form of revenge trading and very risky, even if it gets the result that you wanted.

So we know that revenge trading is bad, we know it is something that we need to avoid and we know that it is a feeling that most traders feel at one point or another. So let’s take a look at some of the things that you can do to try and avoid it or to reduce those feelings if it does raise its ugly head.

Take a break: Go outside, do something that has nothing to do with trading. Sometimes all you need to do is to clear your head, get away from it and think about something else. When you come back after the break with a clearer mind, you most likely won’t have that regret and that desire to place larger or trades that are outside of your strategy.

Document and journal your trading: If you are keeping a trading journal or at least documenting each trade, you can use your information to work out why that original trade lost, this will give you a much better insight and can help reduce the desire to revenge trade, as you know what went wrong, you can use that in the future to improve your trading, it will also help you to realise that placing another target trade will be a bad idea as the reason for the loss in the first place is still present.

Trust your trading system: You have your trading system and you have it for a reason, you would not be using it if it did not have a proven track record or at least the potential to be profitable. If You trust in our plan then you will stick to it, if you do not trust in it then you should not be using it, either way, you should be sticking to your plan and understanding why understanding that any trade that is placed outside the rules f the system is bad trade and a trade that should not be made.

Practice proper risk management: This is where revenge trading really hits, your risk management. It completely throws out the window and as soon as you get rid of your risk management, your account is far more open to losses and potential total loss. It can be hard to stick to it, especially if you do not have a lot of self-discipline or patience to begin with. It is a habit that you will need to get into and one that you will learn the more you do it, but if you have a risk management plan in place, then stick to it, this is the best way of avoiding revenge trading overall.

So that is revenge trading, you can probably see why it can be so devastating to your account, many traders have completely blown their accounts from doing it, but stick to the plan, stick to your risk management and take a break when things are getting a bit too much and you should be able to avoid such trades and to remain on your path to success.

Forex Trade Types

What is Revenge Trading and Should You Try It?

Revenge trading, it sounds like something you would do to an ex or after the markets have hurt you, and in a sense, that is exactly what it is. Let’s spend some time defining revenge trading and determining whether or not it is right for you.

You have probably been told at least a thousand times that losses are a part of trading, in fact, they are a rather large part of trading and they are something that you will experience at every stage of your trading career. What’s important is that those that are trading and experiencing these losses are able to deal with, and to deal with them in a way that won’t p[otentially jeopardize all the work that has been done up to that point in their trading lives.

The term revenge trading centres around the inability of accepting a loss, or the idea that you may have been wrong about something, be it your analysis, or from listening to someone else. Those that are not able to accept those losses will take out their frustrations and anger at those losses on their next trades, other being far too aggressive or completely throwing the rules out of the window. The problem with this is that it throws your discipline out, it also removes any positive risk management that you may have been using and any work that had previously gone into it.

So why would you want to use one of these revenge trades? Realistically you would not want to, they often occur at times when you have become frustrated or have had a number of different losses particularly in a row. Let’s imagine that you have made a trade and it has lost, it loses you $50, this has annoyed you and so you decide to make a larger trade to try and win it back. You can see the issues that could be arising here.

There are a number of different ways that revenge trades can manifest, they are often based on the personalities of the person and also the mood, so let’s take a little look at the sorts of revenge trades that they are the damage that they can do to your account and trading mentality.


If you have had a number of losses in a row, then someone who no longer has confidence in thor trading strategy or are getting fed up with waiting for all the entry criteria to be met, or you just do not feel that the strategy is working as well as you were expecting it to. At this stage, you may begin to start opening up more and more trades in the hope of making profits. Of course, in reality, this is only increasing the risk to the account and the trades being opened are far more likely to end up in the negative due to the nature that they are being opened with little regard to the risk management that had previously been put in place.

Larger Trades

Another thing that some people do when they have made a loss is to increase the trade size of the next trade. This is done for the simple reason that they want to win back the money that they just lost. This is a terrine idea and will only lead to a lot of larger losses. What would you do if the next trade loses? Create an even larger one? Some people do this in the hope of getting more money back and recovering any losses, it is not a recommended tactic and not something that you should think about doing. If you make a loss, accept it, and continue with your plan, do not start making larger trades and destroying the risk management of your strategies.

Removing Stop Losses and Take Profits

Another thing that some people do is to remove the stop losses and take profits levels on the trades. This is simply due to the fact that they want to make more money when it goes to profit, and do not want to make any losses. This is bad in two ways, firstly, with no take profits, the trade could easily go into the usual take profit location but then reverse and so nothing would have been taken. With no stop loss, there is no limit to how negative the trade could go and without a stop loss, a single trade could potentially blow an account. Not a tactic that any trader should be doing.

If you are feeling like you want to do any of those things, then you need to take a step back and reevaluate what you are doing. If you are frustrated or stressed, take some time away from mth markets, go out, do some exercise, and clear your mind. You need to have some belief and trust in your trading plan, it has been doing well, so do not let a single loss or two throws you off. Keep your risk management in place and do not throw away all of the work you have done up to this point, the only person that will suffer is you.

Forex Psychology

The Inherent Dangers of Revenge Trading

Revenge trading – it’s one of the many things that can stop a successful trader dead in their tracks on the path to success as if traders weren’t already dealing with enough negativity. Before you can learn to stop revenge trading and how to avoid it, you’ll need to understand what it is. Allow us to start by defining the term “revenge trading”. 

The term revenge trading refers to a common problem where a trader becomes angry after losing money and attempts to take revenge trades in an attempt to recover their losses. With emotions like anger and frustration clouding the trader’s mind, they are likely to make decisions that are closer to gambling without following their trading plan. There are two reasons why this is a big problem:

  • First, revenge trading causes the trader to throw their discipline out the window. In the heat of the moment, trading plans and strategies are often ignored, and the trader might base their trades off nothing much at all. When your head is stuck on those losses and how badly you want to make the money back, you aren’t likely to follow your strategy or to think about risk management. 
  • A trader that isn’t making good decisions and that makes large trades without accounting for their overall risk is likely to lose more money, thus repeating the cycle that started the revenge trading in the first place. 

As you can see, revenge trading can cause issues with one’s logical thinking in the same way that many other emotions like anxiety, fear, etc. can wreak havoc on trading decisions. Below, we will provide two common scenarios that exemplify revenge trading:

  • In the first scenario, trader A has invested a chunk of money into a trade and wound up losing $97. This leaves trader A feeling frustrated about the fact that he was wrong and anxious to make his money back. In the same ways that someone who is having a bad day might get road rage or become snappy with a loved one, trader A begins to take out his aggression on his trades. He impulsively makes larger trades out of desperation to win that money back, but he winds up losing even more. In the end, trader A loses $200 instead of the initial $97 loss.
  • In the next scenario, trader B loses $40 a few hours after her stop-loss is hit. Although she would usually only risk $50, she decides to double her risk to $100 out of frustration and in an attempt to win that money back. As soon as she makes her $50 back, she cuts her winning trade out because of the fear that she will lose money again, even though she could have made more money. 

Although both of the above scenarios differ, each trader has fallen guilty to revenge trading. Trader A lost more money than he would have because he was chasing his losses, while trader B doubled her risk and closed out her winning trade once she made what she had lost. Bost traders lost money they could have made, as trader A could have stuck with the initial loss and trader B could have made more money on the winning trade. 

Now that we’ve covered what revenge trading is and provided a few examples, we will offer a few steps that can help traders overcome this problem:

  • Step 1:  After a frustrating loss, you should step away and clear your head. You could try doing something that makes you feel relaxed, like listening to music, exercising, or even spending a few minutes outside. Once you’re calm, you’ll be ready to think more rationally. 
  • Step 2: Next, it is helpful to determine the reasons why you lost the trade. Was this an error on your part, or did you make a trading move that seemed reasonable? Instead of betting yourself up over the loss, you simply want to figure out what went wrong so that you can avoid making the same mistake. Also, try to identify any triggers that you might have that signal you’re about to start revenge trading. A fast heartbeat or biting fingernails are a couple of examples. 
  • Step 3: Always follow your trading plan, no matter what. If you have a plan and strategy, you shouldn’t deviate from it because you’ve lost money. If you usually only risk a certain percentage on a trade, don’t risk more just because you’ve lost money, as this is likely to cause more loss. 

If you follow the above steps by clearing your head, determining what went wrong, and sticking to your usual self-given trading guidelines, you should be able to stop revenge trading without much effort.