You take a loss that you know should have been a win, and the next thing you know, you have taken three more losing trades in a row.

You feel a grudge against the stock, treating it like a person who has just wronged you.

At this point, you are angry, confused, anxious, and driven to make the lost money back immediately without question. Instead of walking away from the screens, you keep searching for opportunities. You keep trying to make something work. You keep trading. You keep losing. 

This spin cycle is called revenge trading, and it is a crucial mistake that can absolutely crush your account, and crush it quickly.

Today, we are going to shed light on the importance of avoiding revenge trading in the current market. As a day trader, it is essential to avoid impulsive actions that can lead to significant losses.

Today, we will explore practical strategies to protect ourselves from the pitfalls of revenge trading, ensuring a more steady and successful trading journey.

Understanding Revenge Trading

Revenge trading, driven by emotions like anger, frustration, or greed, lures traders into making impulsive decisions to recoup losses quickly. It is as simple as it sounds. It is the emotional pitfall we human traders fall into when we take one or several losses and want to make that lost capital back immediately, even though we are in a heightened, angry emotional state.

However, revenge trading often leads to further financial setbacks and crushes long-term success. Recognizing revenge trading as a detrimental pattern is the first step towards avoiding its detrimental effects.

Learn more from Kunal Desai, a veteran day trader with over 20 years of trading experience, how to identify revenge trading:

How To Resolve & Prevent Revenge Trading Issues

Embrace Discipline and Patience

Discipline and patience are the key pillars of successful trading. Resisting the urge to retaliate against the market’s fluctuations and patiently waiting for optimal opportunities are essential. By adhering to well-thought-out trading plans, we can avoid succumbing to revenge trading’s allure.

Prioritize Risk Management

Effective risk management is crucial in any market condition, and it serves as a shield against revenge trading. Utilize risk mitigation techniques such as setting stop-loss orders, focusing on proper position sizing, and making sure you are always respecting the 1:3 risk-to-reward ratio on all of your trades. These measures protect your account from excessive losses and maintain a balanced approach to trading.

If you prioritize risk management and ensure that every single trade follows these proper practices, you will avoid taking a bad setup with bad risk management out fo anger and anxiety when in a heightened emotional state, avoiding the recent trading detriment.  

Do NOT be this guy:

Maintain Emotional Detachment From Trading

Separating emotions from trading decisions is a skill that all traders must cultivate. Emotional detachment allows for objective analysis and rational decision-making. Celebrate wins modestly and accept losses as learning opportunities without letting them impact future trades. By staying emotionally detached, we can maintain a clear mindset and avoid falling into the trap of revenge trading. You are then trading the chart and the setup, not your emotions, allowing you to make clear decisions amidst a stressful environment/situation.

Stay Engaged in a Community

Participating in trading communities, joining chatrooms, and seeking mentorship provide invaluable opportunities to gain insights and learn from experienced traders. Engaging in knowledge sharing helps expand our understanding of market dynamics, trading strategies, and risk management techniques. Through collaboration, we can develop a well-rounded approach to trading, reducing the likelihood of succumbing to revenge trading tendencies.

Also, a community or trading partner can prevent you from overtrading or revenge trading simply by having another person ‘monitoring’ you. A trading partner is an amazing resource that many people find within our chatroom upon joining. By opening up to your partner and allowing them to see what you are doing on a day-to-day basis, they can stop you from revenge trading by pulling you out of an emotional state and helping you realize that you indeed are about to revenge trade and should completely walk away from the screens. Find a partner or a community, engage with it, and be open. 

Find out more about our chatroom by clicking here!

Cultivate a Growth Mindset & Accepting Losses

Adopting a growth mindset enables us to view setbacks as opportunities for growth and improvement. Embrace failures as stepping stones on the path to success. By continually learning from our mistakes and seeking ways to enhance our trading skills, we can build resilience and navigate the market with a growth-oriented mindset.If you understand that losses are just a part of the long-term game and journey that is trading, you will learn to accept the losses and move on, taking a valuable lesson with you each time. You won’t on the contrary get angry and try to make that money back immediately by forcing bad setups and revenge trading.

Rrevenge trading poses a significant threat to traders in today’s market. By adhering to discipline, patience, and effective risk management strategies, we can safeguard ourselves against impulsive actions and emotions. 

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The post How to Overcome The Deadly Trading Sin of Revenge Trading appeared first on Bulls on Wall Street.

It’s the start of the new year again, and everyone is talking about goal setting. In trading, goal setting is very important, and every trader has their own unique goals they are trying reach this year.

But there is one goal that every trader should strive for in 2019, no matter your experience level. The goal: make more money by making less trades.

This may seem confusing to newer traders, but trading less will actually make you more money. I don’t know a single trader that doesn’t have trades they know they should’ve avoided last year.

Capital preservation is essential to making money in the stock market. Overtrading and revenge trading are obstacles to overcome on your road to profitability. It is not just about having big winners. 

So how do you achieve this goal? How do you condition yourself to avoid trading subpar setups, and wait for the best opportunities?

Avoiding Unnecessary Losses

A crucial concept to understand in trading is that there are good losing trades and bad losing trades. New traders are often baffled by this, because they are thinking that losing money is always bad. They think that when you take a loss, it means you are a bad trader.

What they don’t understand is that losing money is unavoidable in trading in the long run. We have talked about this before, but the stock market is random by nature, and there is no holy grail trading system that wins 100% of the time. The key is to have a system with positive expectancy, meaning the total value of all your winners exceeds the total value of your losers. 

Good traders realize that they can have 10 losses in a row, and know that they will still be profitable at the end of the year. Controlling your losing trades is what separates the winners from the losers. Winning traders take small losing trades on high probability setups that fit their niche. Losing traders take unnecessary losses from over trading stocks and setups they have no edge on.

Discipline

Discipline plays a major part in your ability to avoid forced trades. The temptation to take random, non-niche trades is greatest right after you have taken a losing trade. You want to make the money back as soon as possible, so you want to find a trade ASAP to give you that win.

The discipline to restrain yourself from emotional trading is essential to develop in order to become a consistently profitable trader. Discipline (or lack of) in other areas of your life will carry over into your trading. If you are good at showing restraint from unhealthy foods for example, you will likely be successful in restraining yourself from destructive trading behavior. Your lifestyle and habits in your everyday life will carry over into your trading.

Knowing Your Niche

Trading less is the result of knowing exactly what type of trading niche you have. If your trading strategy is undefined and vague, you cannot distinguish between good setups and bad setups.

As a result, you don’t know which setups to wait for, and the temptation to take random trades becomes much greater. If you are a trader who doesn’t know what style of trading you trade, what time frames you trade on, what type of stocks you trade, your risk parameters, or know your high probability trading setups, you are just gambling. You will always lose money in the long run.

All of the best traders have a very specific niche that they never deviate from. They have defined every aspect of their trading system, and they are constantly refining and improving it.    

Free Trading Assessment

If there are other bad trading habits you need help with, fill out our free trader assessment here and we will go through all of your trading issues in detail. Don’t procrastinate on your success. Make 2019 the year where hit and exceed all of your trading goals.

The post A Goal Every Trader Should Strive for in 2019 appeared first on Bulls on Wall Street.

Revenge trading is the easiest way to turn  a nice green day into a red one. It is one of the biggest issues we see for new traders. In order to become a profitable trader, you have to learn to combat revenge trading and eliminate it from your trading. In this article we will talk about what it is, why it happens, and what you can do to combat these destructive tendencies.

What is Revenge Trading?

Revenge trading occurs after you have had one or several losing trades, and you start to get emotional. You want to make back the money you just lost, so you start forcing trades on sub-par trading setups. What happens after is that you end up losing even more money, you become even more emotional, and you start to spiral out of control.  

You jump on the next stock that moves and hope that it will rescue your day and restore the gains in your trading account you just lost. The setup is completely outside of your niche, and it ends up turning into another loss. You usually only trade the mornings, but you stick around in the afternoon to try to make your money back. Next thing you know, a small red day turned into you losing a whole week’s worth of profits in just half a day.  

Why Does It Happen?

It is human nature to want to get back what we just lost. Especially when it is something we are emotionally attached to like money. Traders are their most vulnerable after a loss, and the natural reaction is to try to make the money back. It is this mentality that makes casinos so profitable.

Every day there are thousands of stocks moving. There is a ton of temptation to trade one of these random stocks after a loss. Often your emotions will override the rational part of your brain, and you will end up viewing some of these random stocks as a legitimate trading opportunity. The reality is, these stocks are just moving randomly, and there is no edge trading them for you. But you cannot recognize that because you want to make back the money you just lost so badly. 

Solutions To This Issue

Revenge trading happens even to the most experienced of traders. The first step to preventing it from affecting your trading is developing high self-awareness. Turn your attention inward after you have had one or several losing trades. Recognize when you’re starting to get emotional.  

When trading opportunities present themselves in this state, maintain the ability to recognize which setups are a high probability, and which setups are low quality. Ask yourself: Is this a trade I would recommend to my mom with her life savings? 

If you are having difficulty controlling your revenge trading, taking a break and leaving your computer is the best thing for you to do. Getting away from charts will allow you to settle down and recollect yourself.

A daily max loss on your trading account is another great way to prevent revenge trading. A daily max loss will cause your trading account to become locked once you are down a certain amount of money on the day. This will prevent you from spiraling out of control, and prevent you from revenge trading your trading account.

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