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revenge

Revenge Trading

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Revenge trading is perhaps the most counter-intuitive, self-destructive behavioral habit that a Forex trader may fall into. Even in the midst of an apparently relentless losing run, many investors might find themselves enslaved by this seemingly uncontrollable need to keep putting transactions.


It’s pride coupled with a healthy dose of tension. No matter how analytical forex traders profess to be, we must remember that we are all human at the end of the day.


When a trader opens a position, they are investing more than just their money. They’ve put their time, study, and trust in themselves and the markets. So a loss may have a huge psychological and even bodily influence on us.


Physiological changes while revenge trading:


Cortisol is the stress hormone in our bodies. And losses, particularly consecutive ones, might greatly increase our cortisol production. This immediately jeopardizes our ability to make reasonable judgments.
Cortisol increases our anxiety, causing us to panic and impairing our judgment. Our brain enters “fight or flight” mode, and the immediate objective becomes undoing the harm and recouping our losses.
This causes us to make rash deals that we haven’t thought through or included in our overall risk management strategy.


How It Keeps Us In


This is when pride enters the picture.
We’ve all felt like failures because we’re “losing” money as investors. After all, our business is to effectively invest. So, if we’re officially “failing,” it’s tough not to take it personally.
However, pessimism fueled by excessive amounts of stress may swiftly spiral out of control, hijacking our entire thinking process.
• We sink in guilt and rage, unwilling to face our losses.
• We fixate on the amount lost, making it our life’s purpose to return (or avenge!) what has been lost; • We tell ourselves that it MUST turn around at some time; and • We continue to urgently place additional ill-conceived deals.
We find ourselves in the center of a vicious cycle of vengeance trading, and we can’t seem to get out of it.


How to Get Out


The most crucial thing to do when you’re stuck in a cycle of revenge trading is to acknowledge it!
If you’ve lately suffered a string of losses in the Forex market, take a moment to note down what’s going through your mind and how you’re feeling.
Find things that will take you away from the computer IMMEDIATELY and allow you to refresh your brain. Some investors exercise or go out to eat, while others meditate or go for a drive.
After you’ve calmed down, it’s time to devise a strategy. Perform any or all of the following:

• Put a stop to all trades till you rethink your trading approach! This entails conducting further research, fine-tuning the technique, and maybe testing it on an MT4 demo account before reinvesting your funds.

• Use wealth managers to handle your money until you’ve worked hard enough to develop a good trading attitude.

• Look for a trader you want to emulate on a social trading platform or look for a reliable trading signal source.

Remember that having an emotional reaction is normal. We aren’t machines! Accept it, grow acquainted with it, and, most importantly, identify and respond appropriately when it becomes a toxic emotional habit.

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