How to prevent revenge trading

There are various ways you can trade options. You can trade them outright or use them as a more complex strategy. However, you need to be aware of the potential for revenge trading, where you make trades based on emotions rather than logic, which can be dangerous.

Revenge trading often happens when traders feel like they have been ‘cheated’ in some way from a previous trade. Maybe they lost money on a trade they thought would be successful. Or maybe they missed out on an opportunity they wanted to utilise. Whatever the case, their emotions get the best, making trades they wouldn’t typically make.

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Have a plan

The first thing you need to do to avoid revenge trading is to have a plan. This plan should be based on logic and reason, not emotion. It should take into account your goals, your risk tolerance, and the market conditions.

When you have a plan, it gives you a roadmap to follow. It takes the guesswork out of trading and allows you to make decisions based on facts and data instead of emotions.

Set realistic expectations

Another way to avoid revenge trading is to set realistic expectations by knowing what you can and cannot expect from the markets. It also means being okay with the occasional loss.

Trading is a risky business, and there is no such thing as a guaranteed win. If you enter each trade expecting to make money, you’re setting yourself up for disappointment. And that can lead to revenge trading.

Take a break

If you’re angry or frustrated, it might be best to take a break from trading. You don’t have to stop entirely but take a step back and wait for the emotions to subside.

You must often wait until you’re in a better frame of mind before making any decisions. This way, you can avoid impulsive trades based on emotion instead of logic.

Keep a journal

One way to combat revenge trading is to keep a journal. This journal can be a physical notebook or an online document. It does not matter how, as long as you do it.

The purpose of the journal is to track your thoughts and emotions. Every time you feel the urge to revenge trade, write it down. It will help you identify patterns and determine what triggers your emotions.

Talk to someone

If you struggle to control your emotions, it might be helpful to talk to somebody. It could be anyone. The important thing is that you have somebody to talk to who can offer impartial advice.

Sometimes, all you need is to get your thoughts and feelings out in the open. It can help you to see things from a different perspective and make better-informed decisions.

Focus on the process

When you’re trading, getting caught up in the results is easy. But to avoid revenge trading, you need to focus on the process instead, which means staying disciplined and sticking to your plan. It means following your rules and not letting emotions influence your decisions.

Let go of the past

One of the most significant errors you can make is dwelling on your past losses. It will only lead to more frustration and anger. And that will only increase the temptation to revenge trade.

Instead, you must let go of the past and focus on the present. Yes, you might have made some bad decisions in the past. But dwelling on them won’t do you any good.

What’s done is done. You cannot change the past, but you can influence the future. So focus on making the best decisions you can from here on out.

Have patience

Finally, one of the most important things you can do to avoid revenge trading is to have patience. Rome wasn’t built in a day, nor were successful trading careers.

You must be patient and give yourself time to learn and grow to succeed in trading. It would be best to be willing to accept small losses as part of the process. And it would be best to have faith in your ability to achieve your goals eventually.

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