Revenge trading is when traders try to quickly recover losses after a bad trade, often making poor decisions driven by emotions instead of a solid strategy. This can create a cycle of bad trades that only leads to more losses.

How Does Revenge Trading Happen?

Revenge trading usually kicks in after a trader experiences a significant loss. In an effort to "make back" that money, they might take larger risks or stray from their trading plan.

For example, if a trader loses money because of a market drop, they might jump into a risky trade, betting against the trend in hopes of a quick recovery. They ignore warning signs and market data, focusing only on getting back their lost funds.

Consequences of Revenge Trading

Revenge trading can hurt traders both financially and emotionally. Financially, it often leads to more losses and higher trading costs due to increased activity. Emotionally, it can cause stress, frustration, and anxiety, which makes it harder to stick to a trading plan.

Over time, this pattern can lead to burnout, pushing the trader to lose interest in trading altogether.

Trading can be tough and stressful. If you find yourself caught in revenge trading, consider long-term investing instead, as it may be a safer and easier option, especially for beginners.