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Revenge Trading

  • #1
  • First Post: Jun 2, 2009 6:43am Jun 2, 2009 6:43am
Revenge trading occurs when after losing a trade, you immediately enter another trade. Most of the time the second trade you enter is not a valid trade, based on your system, but rather, it does not obey some of the rules, and you take that trade on impulse.


Why does this happen ?
This happens largely due to the fact that you have lost money on trade #1, and now are angry at the market for taking your money, and you want it back. You immediately look for another trade, one that obeys some, but most surely not all of your rules and enter it. You want your money back, and you want it as quickly as possible, that's why you e
nter another trade. However, after some time you realise that the trade is not good, and is not acting in your best interest, and you close it for another loss.

What is the solution ?
After a losing trade, or several lost trades in a row, close your trading software and do something else besides trading, that will clear your head. Read something, watch TV, etc, but resist the temptation to trade. Call it a day, i think this would do you and your account better than looking for potential trades. There is always tomorrow.

It takes discipline to win in this forex trading game, without discipline and proper money and risk management you're account will reach margin call in no time.

What happened today was that i lost 3 trades in a row. I obeyed my system, didn't take any loose trades, but it turned out that all 3 trades moved after a while in the opposite direction, as seen here. It happens. You can't win 'em all.

After I closed all of the 3 trades, I looked at the market for another opportunity, and took it, shorting the USDJPY at 95.62.
After a while however, this trade also turned a couple of pips against me, and for fear of not losing again, i closed it rather quickly for a $2 loss.

We are human, and it's normal to have emotions, even when trading. It's important however, to control our emotions and not to impulse-trade.

I'm calling it a day. See you tomorrow
What are your experiences of such a behavior ?
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Twitter: @forexpokerpro
  • #2
  • Jun 4, 2009 6:06pm Jun 4, 2009 6:06pm
Mmmmm Heiken Ashi candles yummy. They are part of my trading too.

Great post by the way, and I like your blog too. Very informative.

I would highly recommend anyone reading this to visit it.

Regards,

Daniel
  • #3
  • Jun 4, 2009 6:37pm Jun 4, 2009 6:37pm
Great thread. Can relate a little too much.
Trading on negative emotions isn't always a loss. Excellent study of an area allows for a profit after a loss, even if one gets messed up on some of the reasons in the rest of the area. (Of course, then yo-yo trading sets in, which can be worse.) Also, what you said makes a good reason to use reverse scaling (investopedia), giving oneself a chance if those bad ole feelings creep in.
  • #4
  • Jun 5, 2009 4:34pm Jun 5, 2009 4:34pm
Quoting ha-pattern
Great thread. Can relate a little too much.
Trading on negative emotions isn't always a loss. Excellent study of an area allows for a profit after a loss, even if one gets messed up on some of the reasons in the rest of the area. (Of course, then yo-yo trading sets in, which can be worse.) Also, what you said makes a good reason to use reverse scaling (investopedia), giving oneself a chance if those bad ole feelings creep in.
I don't understand your approach of trading on negative emotions, do you mind expanding the subject a little?

Thanks

Daniel
  • #5
  • Jun 5, 2009 4:48pm Jun 5, 2009 4:48pm
Sorry if that was unclear. I was only finding ways to, if negative emotions hit, turn things around so one didn't lose too much in such a condition, given one had already broken one's own mm rules and put oneself on a ledge in a negative-emotion-influenced loss already.

What you suggest, that of purposefully and rationally trading because one has negative emotions, is interesting, considering how much (amygdala?) hold they have on our lives. That's a thinker.

The 'yo-yo' trading of course refers to yo-yo dieting, or intermittent conditioning, or a false, begging, desperate hope/greed ('if only this time'...) atop most emotion charts.
  • #6
  • Jun 5, 2009 5:31pm Jun 5, 2009 5:31pm
Quoting ha-pattern
Sorry if that was unclear. I was only finding ways to, if negative emotions hit, turn things around so one didn't lose too much in such a condition, given one had already broken one's own mm rules and put oneself on a ledge in a negative-emotion-influenced loss already.

What you suggest, that of purposefully and rationally trading because one has negative emotions, is interesting, considering how much (amygdala?) hold they have on our lives. That's a thinker.

The 'yo-yo' trading of course refers to yo-yo dieting, or intermittent conditioning,...
Very true about the yo-yo effect, although I would be working in and outside the trading realm on a general mindset that makes a trader immune to trading emotionally.

One thing that I would advise is to be able to get into a habit of :

a) not looking for blame - a natural human tendency is to complain on things that are not in tune with their perceived reality. To do that they need to find a scapegoat first to blame their situation upon.

When trading, after blaming the broker, bad weather or upsetting news in the tv, the only scapegoat is the trader himself. When the stop is hit, and everything was by the rules, they would blame themselves for the loss. Learning to forgive, or better yet, creating the habit of avoiding blame in the first place, allows the trader to calmly refocus and look for other signals, and otherwise move on.

b) understand what people mean when they say that trading is a probability game. This simply implies that for whatever number of tries, there will be a number of loses and a number of wins. Trader who knows the statistics of his system or his past performance, and they have been proven to be profitable in the long run, can easily focus on trade after trade after trade, because after 100 tries he knows that his accnt will be in black.

Additionally consider an analogy to a basketball game, where players shoot at least twice the amount of shots for the resulting score, and each player is scored on their performance measured in % of shots that made it to the rim to the number of tries. This can make or brake the game, but if the players were to fail the shot and then collapse mentally because of that, they would simply stop trying and the other team could win the entire game. Instead they practise at their home court in order to increase the probability of a good shot and to know their abilities to the point of trust, just like a trader can trust a system, that wins with a certain probability but only if all trades are executed to the best of trader's abilities.

A bit longish, but I hope I conveyed my thoughts without too much of a rant

good luck trading

Daniel
  • #7
  • Jun 5, 2009 10:24pm Jun 5, 2009 10:24pm
yea i remember revenge trading. It was just a month ago when I did that. I lost quite a bit of money. It was such a terrible 2-3 weeks where I was risking everything just to get everything back, sometimes I was lucky and sometimes not. But I ended up losing 40% of my account. Such a dumb mistake when I look back on it, but when you switched from a swing trading to intraday, you learn a whole lot of shit quick. And I learn that revenge trading is the worst thing you could do (just want to make me curse at myself just thinking about it now)

So now I'm rebuilding my account from taht loss wiht sound trading. It will be a slow and painful journey back up, but I have to learn to enjoy the process and not think of the money too much. i think that's the way to really combat that negativity. Focus on trading well, the process of excecution, and not the $, then hopefully you'll be a better trader.
  • #8
  • Jun 5, 2009 11:03pm Jun 5, 2009 11:03pm
hey everyone...I am trying to develop a trading system for myself in which the need to revenge trade wouldnt really arise - that is, only buying and selling at very very strong supports or very very strong resistances with minimal stop losses. For example, the EUR/USD has just broken a strong 4 hour and daily support. If it holds on Monday as resistance, I will look for opportunities to short at the pull-back.
The pull-back is really important because that allows you to enter the trade with as little of a stop-loss as possible, so even if the trade DOES go against you your losses would be minimal and wouldnt really incite an internal rage for revenge against the market
Please give me your feedback, it will be much appreciated.
Also, check out my blog at http://gulzaarfx.blogspot.com
  • #9
  • Jun 5, 2009 11:16pm Jun 5, 2009 11:16pm
i have blown 3-4 accounts But fastest one blew due to Revenge trading i deposited 200$

made 36$

lost 40$

made 40$ by Revenge luckily.

lost 45$

and than revenge came by and
blown the 200$ account.
  • #10
  • Jun 5, 2009 11:43pm Jun 5, 2009 11:43pm
My first account: Deposited $500 in 2005.
Reached $550 but then blew it in about 3 months.

My second account: Deposited $12,000 in 2007.
Reached $15,000 but then traded it down to $350 in about 3 months.

My third account: deposited $50,000 in 2009...
A while ago it was sitting on a NAV of $38,000 because of bad trades that were still open. I could have just closed it all off and moved on with a balance of $38k, but instead I held on to those bad trades and now my account is $15,000 after getting as low as $8000. The good thing is although I have lost money I am very grateful for the experience and am more confident about mm and trading with less risk into the future.
  • #11
  • Jun 6, 2009 6:20am Jun 6, 2009 6:20am
There is only one way to stop the urge for revenge trading.

That is to learn not to condemn anyone for anything. After Jesus saved Mary Magdalene from being stoned by an angry mob, he simply asked her: "has any man condemed thee?" After she said no, he replied " neither do I, go and do wrong no more"

I'm an atheist by the way, but I find the Bible full of good advice, and the clincher here is to learn to keep separated from the maket, keep it impersonal, and never go to a stage where you need to forgive. This is too late. It is better to learn not to condemn yourself or the markets for drawdowns

To achieve that, you need a sound strategy that has worked in the past, that you know you can trade flawlessly, and only work on your execution, because this is the only thing we can influence.
  • #12
  • Jun 7, 2009 10:52am Jun 7, 2009 10:52am
Quoting nasir.khan
i have blown 3-4 accounts But fastest one blew due to Revenge trading i deposited 200$

made 36$

lost 40$

made 40$ by Revenge luckily.

lost 45$

and than revenge came by and
blown the 200$ account.
Is sounds like you're uncapitilised, only risk 1% / trade and try again.
  • #13
  • Jun 9, 2009 12:54pm Jun 9, 2009 12:54pm
Quoting FXive
My first account: Deposited $500 in 2005.
Reached $550 but then blew it in about 3 months.

My second account: Deposited $12,000 in 2007.
Reached $15,000 but then traded it down to $350 in about 3 months.

My third account: deposited $50,000 in 2009...
A while ago it was sitting on a NAV of $38,000 because of bad trades that were still open. I could have just closed it all off and moved on with a balance of $38k, but instead I held on to those bad trades and now my account is $15,000 after getting as low as $8000. The good thing is although I...
No offense, but how in the f**k do you lose $42k off a $50k account?

I haven't had a single negative day since July of 2008,minus my 10 weeks holidays.

Haven't you heard or thought of:
- risking 2-3 % of your entire account on any given trade?
-splitting trades and taking profit?
-NOT trading when things are volatile/you're not alert/you don't know what's going on?
-maybe your broker is fooling around?

The writing was on the wall (for those paying attention) for many months that the economy was about to tank.

Last summer you could have taken out put options on almost any industry/mineral/manufacturer and with that $50k you'd be easy sitting on 7 figures +.
The harder I work,the luckier I get.
  • #14
  • Jun 10, 2009 8:41am Jun 10, 2009 8:41am
Skippy,

Most don't have the sense you do.
I don't.
I chase the projection pot o' gold at the end of the rainbow,
like most. Seek camaraderie with this. Hope I turn a new leaf on trades.
Wasting my time. (Lots of fun, tho. I feel committed, ha-ha.)

You have the mindset of a trader, it seems.
You willing to share it?
Like, go over one of your trades, and tell us what you're thinking? Your rules of thumb when doing this? How do you think a typical dummy like me breaks such a rule on mindset? Is it something besides mindset you believe separates you from the crowd?

Hey, doesn't hurt to ask.
  • #15
  • Jun 10, 2009 12:21pm Jun 10, 2009 12:21pm
ha:

First of all don't be negative and call yourself a dummy.

Ignorant,yet educatable,of rules and facts,yes- but not a dummy.

The dumb things I see are people hoping to make $$$$$$ in 2 weeks with 20 minutes a day trading on a $700 account by using lagging indicators.

The stupidest thing: I constantly see abused here is the most basic
money management rule-risking just 2 to 3 % of your entire account on any one trade.
What is so hard about that?

Just look at my posts,it's all there-lots of monitors,trade each zone,multi lots,price action.


I just plain know whats gonna happen most of the time,due to years of doing this and listening to my subconcious.

Don't know of many (if any) who work as hard as I do....it's not the money, I just love doing it.

Anyways, it's 10 am,I've been trading for 17 hours,and I'm off to bed for a few hours until the Asians decide to start things up.
The harder I work,the luckier I get.
  • #16
  • Jun 10, 2009 5:37pm Jun 10, 2009 5:37pm
Quoting Skippy
No offense, but how in the f**k do you lose $42k off a $50k account?

I haven't had a single negative day since July of 2008,minus my 10 weeks holidays.

Haven't you heard or thought of:
- risking 2-3 % of your entire account on any given trade?
-splitting trades and taking profit?
-NOT trading when things are volatile/you're not alert/you don't know what's going on?
-maybe your broker is fooling around?

The writing was on the wall (for those paying attention) for many months that the economy was about to tank.

Last summer you could have...
No offense, but haven't you heard of "Get rich quick" and "Gambling addiction"? Oh yeah, and "Revenge Trading"?!

It's easy looking back on the situation, but as I said, I'm improving dramatically especially with my self-discipline.

p.s. This is what I've done in a sub-account the last few months:

2009-04-01 $100.00
2009-05-10 $115.56 Topped up to $1115.56
2009-05-27 $1249.31 Topped up to $3000.31
2009-06-05 $3311.95 Topped up to $5000.00
2009-06-11 $5222.03


100.00 -> 115.56 15.56% 39 days
1115.56 -> 1249.31 11.99% 17 days
3000.31 -> 3311.95 10.39% 9 days
5000.00 -> 5222.03 4.44% 6 days
  • #17
  • Jun 10, 2009 5:48pm Jun 10, 2009 5:48pm
Quoting Skippy
The stupidest thing: I constantly see abused here is the most basic
money management rule-risking just 2 to 3 % of your entire account on any one trade.
What is so hard about that?
Skippy, ask a gambling addict: What's so hard about not walking into a casino?
Or ask a smoker: What's so hard about not smoking?

Even 'knowing' how dumb something is, isn't enough to stop doing it unfortunately
  • #18
  • Jun 10, 2009 5:58pm Jun 10, 2009 5:58pm
Quoting FXive
No offense, but haven't you heard of "Get rich quick" and "Gambling addiction"? Oh yeah, and "Revenge Trading"?!

It's easy looking back on the situation, but as I said, I'm improving dramatically especially with my self-discipline.

p.s. This is what I've done in a sub-account the last few months:

2009-04-01 $100.00
2009-05-10 $115.56 Topped up to $1115.56
2009-05-27 $1249.31 Topped up to $3000.31
2009-06-05 $3311.95 Topped up to $5000.00
2009-06-11 $5222.03


100.00 -> 115.56 15.56% 39 days
1115.56 -> 1249.31 11.99% 17 days
3000.31...
you're doing good. I'm on my recovery after a binge of revenge trading. I hate to relive that experience again!
  • #19
  • Jun 10, 2009 10:54pm Jun 10, 2009 10:54pm
If one has no money or not enough money, you cannot get more than a few glass to get drunk.

My only solution to this problem is to have a main account that can't be traded. You can fund it to the full and each time, when needed, you fund your sub accounts from it.
Limit your sub accounts funds to the risk you would like to take. Any profits above that ammount is to be transfered back to the main account every week.

Funding or transfer will take hours or a day. Thus, even if you blow the account through revenge, you will be forced to pause - thus giving you sometime to rethink the situation.
This is my hard stop loss for any trade.
  • #20
  • Jun 11, 2009 5:38am Jun 11, 2009 5:38am
Quoting highway
Funding or transfer will take hours or a day.
At my broker, transfers between sub-accounts are near instant.
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