What is Revenge Trade? Stop Revenge Trading Before You Blow Up Your Portfolio.

I heard a story from a trader who once had a 2 million baht portfolio, but it was wiped out in a single day due to Revenge Trade. He recounted with a trembling voice that after an initial loss of 100,000 baht, he tried to trade to get it back, leading to increasingly heavy losses until only 50,000 baht remained in his portfolio. I've heard countless stories like this from many traders. Revenge Trade is one of the most dangerous self-destructive behaviors and a crucial part of 7 Trading Psychology Tips to Survive in the Market that every trader must be aware of and learn to control.

What is Revenge Trade and Why is it Dangerous?

Revenge Trade is trading driven by anger, frustration, or the desire to recoup losses after a losing trade. Traders in this state often try to open new orders immediately, hoping to profit and compensate for the incurred losses. They typically increase their lot size, don't use stop-loss orders, or trade in unfamiliar currency pairs. A survey by DailyFX found that 73% of traders who blew their accounts were triggered by Revenge Trade.

An experienced trader once explained to me that Revenge Trade is like driving when you're angry. The angrier you get, the faster and more recklessly you drive. The rational decision-making part of the brain becomes overwhelmed by emotion, making it impossible to see clear danger signs. It's similar to how he once lost 500,000 baht in a single night because he tried to recoup an initial loss of only 50,000 baht.

Warning Signs You're Engaging in Revenge Trade

From my experience talking to many traders, I've observed signs indicating they are falling into Revenge Trade. The first sign is opening new orders immediately after a losing trade, without pausing to analyze or wait for a new setup. One trader told me he knew he was engaging in Revenge Trade when he opened 10 orders within an hour, whereas he normally only opened 2-3 orders per day.

The second sign is increasing lot size more than usual. One female trader recounted that she once increased her lot size from 0.1 to 1.0 immediately after a loss, thinking that one win would recover everything, but the result was a loss 10 times greater. The third sign is trading currency pairs you've never traded or are unfamiliar with. And the final sign is not using a stop-loss or continuously moving the stop-loss further away, due to an unwillingness to accept defeat.

Psychological Reasons Behind Revenge Trade

Trading psychologists explain that Revenge Trade stems from a cognitive bias called "Loss Aversion," where the pain of losing is twice as powerful as the pleasure of gaining. When we incur a loss, the brain releases cortisol, causing stress and an urge to quickly compensate for that negative feeling. A senior trader once told me that Revenge Trade often follows What is FOMO? The Psychology of Fear of Missing Out Every Trader Needs to Know because when trading with FOMO leads to a loss, anger and the desire for revenge immediately follow.

Another significant reason is ego and pride. Many traders feel that the market "cheated" or "played tricks" on them, leading them to want to prove they are smarter than the market. I once heard a trader say, "The market challenged me; I have to beat it." This kind of thinking is the beginning of disaster, because the market has no emotions, doesn't know us, and doesn't care how we feel.

How Professional Traders Stop Revenge Trade

Many successful traders share effective methods to stop Revenge Trade. The first method is to strictly set a Daily Loss Limit. One trader, who has been consistently profitable for 5 years, said he stops trading immediately when he loses 3% of his portfolio for the day. No matter what, he closes his computer and does something else right away. This technique is part of How to Trade Forex Without Blowing Your Account that every trader should implement.

The second method is to have a Cooling Period or a mental break. A female trader I know sets a rule to always take a 30-minute break after a losing trade. During that time, she gets up from the screen, goes for a walk, exercises, or meditates to calm her emotions before returning to analyze the market. She says this method has helped her avoid Revenge Trading for 2 years.

The third method is to keep a detailed Trading Journal, especially noting your emotions while trading. I recommend reading Unlock Profits! 5 Secret Trading Journal Strategies Used by Top 1% Traders to learn the correct way to record. One trader said that after he started noting his emotions every time he traded, he found that 90% of his major losses occurred when he felt angry or frustrated. Knowing his weaknesses helped him be more cautious and better avoid Revenge Trade.

Building a Strong Mindset

Traders who survive in the market for a long time often have a different mindset than beginners. They view losses as a part of doing business, not a personal failure. One trader who has been trading for 15 years told me, "Losses are like the rent for doing business. If you don't pay the rent, you can't do business." This perspective helps him not get angry when he loses and not try to get revenge.

Developing a good mindset requires practice and building the right habits. You should study the 7 daily habits that transform you into a professional trader and implement them consistently. Every successful trader I know has experienced Revenge Trade before, but they learned from their mistakes and developed the discipline to control their emotions.

Conclusion

Revenge Trade is one of the main reasons why 90% of traders fail. From the countless stories I've heard, no one who engaged in Revenge Trade succeeded; there was only blown accounts and regret. Overcoming Revenge Trade is not easy, but it is essential if you want to survive in the market. Remember that the market will open again tomorrow. Opportunities are always there; there's no need to get revenge today. Preserving your portfolio is more important than trying to get revenge on the market. A good trader is not someone who never loses, but someone who knows how to manage their emotions and doesn't let a single loss destroy their entire portfolio.

Sources

1. Investopedia – Trading Psychology: What It Is and Why It Matters
2. Bloomberg – Retail Traders Post Worst Day Since April as Tech Rally Stumbles
3. Harvard Business Review – Managing Emotions in Financial Decision Making
4. Investopedia – Understanding Loss Aversion in Trading: Definition, Risks, and Strategies