What is revenge trading?


Retaliation trading occurs when a trader engages in another trade after a large loss. The idea is to recover from the immediate loss. The thought behind it is that by doing another trade (supposedly a winning trade), then losses can be recovered quickly.

But as you know, the market is unpredictable.

And the expected winning trade will most likely turn into a losing trade, making the number that the trader is trying to recover more and more.

According to Steenbarger, “Revenge trading is caused by wrath as you are angry that you lost and have the lust to make it all back quickly.”

What is behind revenge trading and why do traders use it?

A lot of emotions - anger, fear, shame, and greed - lie behind this irrational activity. Those things must have affected every trader at one point or another in their trading journey. Please note, revenge trading does not leave anyone, not even new traders.

Even some professional traders and people with many years of experience easily succumb to this practice. And that's what makes it (revenge transaction) even more absurd.


Trading coaches who have worked with traders of various levels attest to the destructive effects of retaliation trading.

In most cases, traders using revenge trading tend to double or triple their positions, as they think the next trade will be a winning trade.

Anger and greed

With anger (before the market) as well as greed being the dominant and decisive emotion after a big loss, a trader can automatically enter the trade without hesitation.

But most of the time trading will go against them and the trader will record a bigger loss.

Fear and shame

For some traders, the fear of accepting a loss (especially a large one) is so great that they want to execute a trade of revenge right away.

The urge to recover from a loss can also be motivated by a fear of facing a friend, relative, or co-worker. For many traders, saving face is a powerful motivator, especially if they have a reputation as a successful and successful trader.

5 effective ways to combat revenge trading

After considering the potential impact of retaliation trading, stopping it is to every trader's benefit. Based on a handful of trading coaches and trading psychologists who have worked with thousands of traders, here are 5 effective steps you can take to combat the vengeance trading vengeance.

Step 1. Temporarily suspend the transaction

While it is difficult to keep an objective view and control your emotions after a loss (especially a large loss), the best course of action is to take a step back and stop trading even for a loss short time.

Take a day or two off transaction. Don't trade anything! Or if you really have to trade, only trade a small order when you feel the need to enter the market.

Step 2. Do a self-assessment


Once you have exited the market temporarily, now is the time to evaluate yourself objectively and emotionally to find out what is the cause of your losses and retaliation trading.

Steenbarger, who is also the author of the book "The Psychology of Trading", says it is important for a trader to be self-aware when dealing with revenge trading and situations. Other challenging deals.

Step 3. Evaluate market conditions

After we have evaluated ourselves, now is the time for us to evaluate what's happening in the market:
  • Is the market too volatile to trade?
  • Are there any solid trading opportunities or trends?
  • What drives the market at this particular moment, making it difficult to trade?
Important economic data and events like the decisions of the US Federal Reserve and other central banks can create trading opportunities. They can also create volatility in the market. And sometimes, too large volatility can make trading too risky.

Step 4. Evaluate your trading strategy


Another important thing you need to do to avoid retaliation trading is to evaluate your own trading strategy to see if it is appropriate for the current market conditions. This will give you the opportunity to adjust the way you trade (if needed).

It's also time to review your entry and exit strategy:
  • Do you have a solid exit strategy in place?
  • Did you stick to your exit strategy?
  • What about your entry criteria?
  • Do you see a setup that gives a reasonable entry point or are you just trying to force a transaction?
Step 5. Make the necessary adjustments

After doing all the evaluations, you will be able to make adjustments to your trading strategy or process. This may also be the right time to change your trading habits once you have identified the strengths and weaknesses of your trading.


In the book "High-Performance Trading" by author and trader Steve Ward suggested that traders should develop for themselves post-loss etiquette. He shared this four-step strategy based on Jeffrey Hodges's "Sportsmind".

This can also be used as part of your toolkit against retaliation trading:
  1. Gently admit that losing trades are not what you want/expect.
  2. Take note of feedback and lessons learned and "throw" the trading aside.
  3. Make a mark or mentally train what you wish happened.
  4. Affirm that it's "the way I'll do it next time".