​Keep Revenge Trading from Blowing up Your Account

WikiFX Strategies (25 Feb.) - Traders who engage in revenge trading often refuse to accept their losses. The idea of overcompensation controls the minds of frustrated traders. Dangerous as revenge trading is, traders must get rid of it.

Revenge trading is when a trader attempts to win back losses by entering a larger trade. Struggling in extreme emotion, you throw your trading discipline out the window and try to force a trade in order to recover from a previous loss. But that only makes things worse. A single loss may evolve into a disastrous retracement or an extra margin.

While revenge trading is common in the market, it's vital to recognize it and make efforts to avoid it. Here are some general mistakes made by vindictive traders.

1. They are trading according to emotions rather than logic and strategy. Taking the same position at different prices results in more losses to them.

2. Hedging transactions rather than restructuring their positions according to a reasonable investment plan.

3. All thoughts of stop-loss are banished. What they want is to add their positions to recover the previous losses.

Trading losses are inevitable. With this in mind, traders must make sure they choose the right trade and hold a small position, so that they won't fall into revenge trading because of emotional attachment to a particular trade.

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