I want to talk about one of the worst mistakes traders make… and something many of us go through at some point: revenge trading.
Having bad days, weeks or even months are a natural part of every trader’s life. One of the biggest lessons we can learn is how to roll with the punches and accept losses gracefully.
However, you cannot make up for a bad move or strategy by doubling and tripling down…
Revenge trading is one of the worst mistakes traders can make because it can quickly transform into a poisonous recipe for disaster, no matter if you’re a novice or veteran. It’s one of the biggest factors and causes of failure a trader can face… Yes, it can totally blow up your account!
So what exactly is revenge trading?
Revenge Trading — 1 of the Worst Mistakes Traders Can Make
Revenge trading is forcing another trade to recoup from previous losses. It’s mostly practiced by traders who were on a winning streak before suddenly suffering a big loss, or a string of losses.
Revenge trading is a natural and almost instantaneous emotional response when a person loses big on a trade, which is why it’s one of the worst mistakes traders can make, especially newbies. Rather than reflecting on that loss and analyzing what went wrong or what they could do differently next time, they immediately — and irrationally — move onto their next trade… only to suffer another loss.
Before you know it, it’s like a snowball rolling downhill… growing and growing.
The idea and base emotion behind revenge trading is to recover from a loss as soon as it happens. They’ll put on a new trade and believe it’s a huge winner that will make up for all the money they just lost… and more.
But the reality is this type of trading rarely works because the stock market is largely not predictable.
Let’s put it into perspective…
The Reality of Revenge Trading
Revenge trading is dangerous and irrational — that’s why emotional maturity is one of the best tools for every trader to have.
And it’s OK to admit if you’ve dabbled in revenge trading before — I can almost guarantee that every person on their journey has fallen for the sweet song of revenge.
But that crap rarely works out!
In fact, revenge trading is the biggest, most amateur mistakes someone can make. Trying to settle a score and prove a point to a stock — that’s going to move in whichever direction no matter how it makes you feel — is a rookie and fatal move. Guys, you can’t get back at a stock or company by doubling down.
Instead, the next time you find yourself in a losing trade and have the urge to take revenge, try doing this…
Watch the video below to learn more about the worst mistake traders can make — revenge trading — and how to handle it with grace. Also, make sure to check out this trading strategy!
And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
