What is Revenge Trading?

What is Revenge Trading?

Revenge trading is the act of entering a new trade immediately after a losing trade, without a valid setup, in an emotional attempt to "win back" lost money. This destructive behavior almost always leads to further losses and is a leading cause of blown trading accounts.

Warning Signs

• Immediate re-entry: Entering new trade within minutes of a loss
• Larger position size: Doubling down to recover faster
• No setup: Trading without meeting your strategy criteria
• Emotional state: Anger, frustration, desperation
• Abandoning stops: Removing risk management

Prevention Strategies

• Pre-define breaks: Mandatory pause after losses
• Daily loss limit: Stop trading at -2% or -3% for the day
• Journal emotions: Write down feelings before next trade
• Discipline over profits: Following rules matters more than recovering losses

Deep Dive

Most edges come from applying clear rules consistently. Expand your analysis beyond a single signal: add context from higher timeframes, recent volatility, session behavior, and catalysts. Define invalidation so a trade becomes obviously wrong fast, keeping losses small while letting winners compound.

Trader Checklist

• Higher‑timeframe bias aligns with the setup.
• Clear level or zone for entry with confluence.
• Pre‑defined stop beyond structure; 2–3R target.
• Session/liquidity supports follow‑through.
• No imminent high‑impact news unless planned.

Strategy Ideas

• Combine structure with momentum confirmation (break/close/acceptance).
• Use partials: scale out at first target; trail remainder.
• Journal results by session and pair to refine timing.

Risks and Limitations

• Thin liquidity widens spreads and distorts signals.
• False breaks around obvious levels—wait for acceptance.
• Overfitting indicators; keep the process simple and robust.

Example

Map bias on the daily chart, mark a zone, and wait on 1H for a close back above with rising participation. Enter on the retest; stop beyond the invalidation wick; target prior swing with room for extension. Record the outcome and context to iterate.