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revenge trading

Trading bigger or faster right after a loss to win it back, usually breaking the plan.

Revenge trading is making a larger or faster trade after a loss in an attempt to win the money back. The decision is driven by frustration or urgency and often breaks the existing plan.

The urge can lead to larger position sizes, more trades, or weaker entry conditions. These choices increase exposure at a moment when attention and judgment may already be strained.

A pause, a written daily limit, and recording whether a trade followed the plan can help identify the pattern. No pause or rule can guarantee a good outcome, but it can prevent one loss from automatically dictating the next decision.

Example

Nora's fictional practice account starts at $10,000. One planned trade loses $100, leaving $9,900. Upset, she doubles the next position; it loses $200.

Working: account after both trades = $10,000 − $100 − $200 = $9,700, a total loss of $300. The larger second loss did not recover the first one; it added to it. Her journal can flag that the second trade exceeded the planned size.

Common mistakes

  • Doubling size to try to recover a previous loss.
  • Treating urgency or anger as a reason to ignore entry rules.
  • Continuing after a written daily stop limit has been reached.
  • Most people who trade lose money.

Learn it in the course