Revenge trading, or “tantrum trading” as it is often referred to, is a very dangerous phenomenon to occur in the Forex market. If you’ve never heard of this term before, we will start from the very beginning.
Basically, revenge trading takes place after you have suffered from a large financial loss as a result of a trade-gone-wrong. Remember, every trader, including you and I, are human. We make mistakes, and we cannot be perfect the whole time. Therefore, it is absolutely inevitable that at some point in our trading careers, we will suffer an account set back (possibly in the order of a few hundred or a few thousand dollars).
When a loss is made, our own personal sentiment towards the Forex market can change. We might be angry, emotional, or just downright outraged that a trade we thought was so perfect – has now turned out to be a total loser.
If you catch yourself with any of those above personality traits, it is definitely time to take a break from Forex. If not, the following things can happen.
Getting Revenge on the Market
Let’s face it. The Forex market doesn’t have a personality. It doesn’t care if you win or lose. It couldn’t care less whether you earned $1,000,000 in a single year from trading currencies, or lost $500,000 and your home.
Therefore, the idea of revenge trading is completely flawed. When you place a revenge trade, you take on the attitude of a novice investor. The following can therefore result:
- Trades can be placed simply for the sake of placing a trade.
- Trades can be placed with absolutely no logic behind them.
- Stops and limits can be wildly misplaced.
- Proper risk management goes out the window.
The outcome of a revenge trade is often not positive. Many people find that their situation worsens as a result of the rogue, thoughtless trade. Hence – it’s better to focus your energy on earning profits back in a reliable, thoughtful way, rather than simply on the flip of a coin.
If you’re In the Revenge Trading Mood
If you suddenly find yourself feeling bitter and angry towards the Forex market, a good idea is to step back and take a break. Yes – this might sound counterproductive. After all, you probably just want to earn the losses back as soon as possible.
However, until you have calmed down and can genuinely think logically, trading should be put on the backburner, and a totally different activity should be taken up.