TPS E17: Why revenge trading will end your trading career?

Revenge trading comes from one thing and one thing only, blaming the market for your loss. But let’s think about this realistically. Who is to blame when you have a loss? Actually I think blame is the wrong word. The question should be who is responsible when you have a loss?

Of course, the correct answer is you. The market didn’t cause you to have a loss. So getting mad at the market and trying to seek revenge really doesn’t make a whole lot of sense. And if you are responsible for your actions, then when you seek revenge for the loss you received, you are actually trying to get revenge against yourself. And that definitely doesn’t make any sense. Why would you want to seek revenge against yourself?

But that is exactly what you are doing when you get mad at the market and try to get your losses back in almost a vengeful way. If you are frustrated and angry, you are just going to make trading mistakes that will most likely even cost you more money.

Many people are confused at why revenge even comes into play during trading. But it’s really very simple. Think about gambling, for example. You can only lose what you decide to bet. When you bet the money, it’s easy to take responsibility for your losses because most likely you had to actually physically place the bet on the table, and you can only lose what you decided to risk.

But obviously, in trading, it’s much different. If you don’t or can’t get out of a losing trade, you can lose much more than what you originally planned to lose. Even with stop orders in the futures markets, there can be slippage involved that will cause you to lose more than what you planned. Then it’s easy to blame the market for those losses. The markets took your money. This is definitely where the revenge factor comes into play.

Let’s look an example: Let’s say you lose 300 points in the last trade. Will 100 points profit be enough in the next trade? The market may be clearly telling an objective observer that’s all there is in this trade (100 points). But to the person who just lost 300 points (especially if they intended to risk less than 300 points), many times 100 points won’t be enough because you’re not getting back everything you lost. You will need a lot closer to 300 points to feel right again. But let’s think about this realistically. Does one trade really have anything to do with the other? The market doesn’t know or care how much you made or lost in the previous trade. It has no bearing whatsoever on your next trade or your next fifty trades. That is one thing you always need to keep in mind at all times.

One trade has nothing to do with the next trade. They are not related in any way. So attempting to get back in one trade what you lost in the last trade doesn’t make any sense. You can only profit from what is available in the current trade. And again, it has nothing to do with the trade you were just in.

When you feel compelled to get back what you just lost, you try and take on the market, almost as if to challenge it to a fight. That is certainly the wrong attitude. You want to flow with the market, not fight it. You can’t fight it, because you can’t win that way. You can’t change what the market will do. You can only change yourself.

Mark Douglas states it very clearly…. “The market can’t take anything away from you that you don’t allow; if you lost money or lost more than you intended to risk, you gave your money to other traders. Ultimately, however, revenge creates an adversary relationship with yourself. If you’re the one who gives your money to the market, you are also the one who gives yourself money out of the market. If you are angry with yourself for letting the last trade get so out of hand, whatever the market is offering you “now” in terms of an opportunity, won’t be enough. From a psychological perspective, you won’t take the opportunity for a profit or otherwise because you haven’t accepted the last trade as being all right. In effect, you will be denying yourself the current or next opportunity to punish yourself for the past mistake. In reality, you can’t get back at the market, and a belief in revenge only allows you to get back at yourself.”

I think it’s probably obvious to most people that trying to take revenge on the market is bad. But I hope you now realize that when you are trying to get revenge on the market, you are really only taking revenge on yourself.