Direct from the desk of Dane Williams.
Revenge trading in forex is when you place impulsive and emotionally-driven trades to recoup the losses you suffered from previous losers.
It’s a topic that is often brought up and circulates in chats between traders.
That’s because when the heat is on, revenge trading is a situation that tempts even the most experienced forex traders..
I’d be lying if I said that I was above revenge trading but the truth of the matter is that I’ve been there.
What happens is that instead of following your back-tested, well thought out trading strategy, you simply throw caution to the wind in the hope of reversing your fortunes.
Something that might go your way once or twice.
But long term, you will lose.
EVERYTHING.
Don’t do it.
Now with that off my chest, let me address the fundamental question of why we revenge trade in forex?
Well, it's a feeling that is hard to describe unless you’re there in the moment.
The frustration and anger that comes from losing money in the forex market can be an overwhelming emotion.
Even though it's been tested and proven to be consistently profitable, after taking a couple of losses, you naturally start questioning your strategy.
The desire to recover your losses as quickly as possible becomes almost irresistible.
For me, I've found that revenge trading stems from ego and a desire to prove that I’m right.
Even when the rational side of my brain is telling me that looses are a part of the game and I need to let the market decide how things play out.
So if we know it’s crazy, how do we fight the urge to revenge trade in forex?
There’s no two ways about it, this is a battle that we will all have to face numerous times in our journey as forex traders.
The key is to establish a solid trading plan built around a proven strategy and stick to it.
Even in the face of losing trades that will line up from time to time.
Remind yourself that emotions have no place in your strategy’s entry/exit decisions and that losses are a part of the game.
I've learned to accept losses as a part of the game, rather than personal failures.
You need to as well.
No matter how tempting it may be to cancel them in the heat of the moment, it's crucial to set your stop-loss orders and respect them.
Another effective strategy to combat revenge trading is to just take a step back.
Try stepping away from your computer or MT4 trading platform for a while after taking a couple of losses and feeling your head start to fill with noise.
This break allows you to regain perspective and avoid making impulsive decisions that could irreversibly damage your account.
Practising mindfulness while you’re away from your charts is one way to help take your mind off the market and reduce the urge to revenge trade.
Additionally, surrounding yourself with a supportive trading community, like the one we’re building here at INLEO, can be immensely helpful.
I've found it valuable to share experiences and insights with other forex traders who understand the emotional challenges of the market and I know it can help you too.
All you’ve gotta do is jump on Threads and ask.
Finally, revenge trading in forex is a pitfall that all of us in this highly stressful game must navigate.
It's a battle of emotions versus rationality where there can only be one winner.
Don’t let the market trick your own mind into defeating you!
Best of probabilities to you.
Posted Using InLeo Alpha
