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.

Some of the biggest fortunes in the world have come from stock market crashes. In my latest video lesson, I talk about how to trade in downtrending macro market conditions, and my favorite strategies and tips to use to capitalize:

Have a Plan During a Stock Market Crash

Stock market crashes aren’t anything new. You were around in 2008, and probably during the early 2000’s during the dot-com bubble. Ever since the stock market was founded in the 20th century, the market has crashed every 5-10 years. 

Regardless of whether you are 10-year trading veteran, a complete newbie, or just someone with 401k, you need to have a plan for what you will do during a market crash. It should be pre-determined, otherwise, when the crash happens, you will panic and sell the bottom just like everyone else who loses a ton of money during a crash. 

Understand the Big Picture Trend of the Stock Market

The advice I would give to the average Joe with money in the market is to just do nothing! Sure you could hedge, but for most people that gets too complicated, and they end up messing it up because they time it incorrectly. 

If you are a momentum trader like myself, and are looking for some more higher-risk, high-reward strategies, I would look into various instruments to short-sell the market, which is essentially capitalizing on the stock market going down (learn the strategies I use in bear markets here) .

Take a look at the monthly chart of the Dow Jones industrial average:

What is the trend? Clearly up. What happens every time there is dip? It gets bought up. So what does that mean you should when the stock market dips? NOT SELL. This is, of course, is easier said than done.

At the moment when you are watching your portfolio get crushed, the primitive part of your brain is panicking, and you convince yourself that everything is going to 0. Don’t let fear dictate your decision making during a crash!

• Stay Calm, Don’t Make Impulse Decisions With Your Money
• Don’t Watch Every Tick: Watching the Markets 24/7 Will Just Make You More Emotional
• Don’t Think Like The Crowd
• Hedge Your Long Term Positions
• Don’t Catch A Failing Knife, Let the Bottom Pick Itself

Get Started With Our Free Trading Kit

Our trading kit is the best free resource out there for new and struggling traders. It includes:

• Intro to Trading Course
• Comprehensive Trading Handbook
• Trading Consultation

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There are many great free trading resources out there that can contribute significantly to successful trading. If you’re a new trader looking to keep expenses low here are 6 great free resources:

Finviz.com: Pretty much has everything you need for researching stocks on one site. Has daily percentage gainers and losers of all listed stocks, a stock screener with pretty much every filter you can think of, and has great fundamental statistical overviews on all stocks. They have a daily chart with indicators and lists the press releases of every stock in chronological order. It will link directly to all the press releases directly as well.

Marketchameleon.com: Live pre and post-market data with the highest percentage gappers. Great site to check before the market open to help you prepare your watchlist if you don’t have a paid scanner like Trade-Ideas. Has futures and forex quotes as well.

ThinkorSwim: Excellent free charting software that comes with a decent scanner and all the indicators and features you need to trade successfully. You can get live quotes if you setup an account with Think Or Swim (you do not have to deposit any money in the account), and will get access to their trading software. They also have a simulator and a ton of other features worth exploring.

Tradingview.com: Great site with free charting software with live quotes. The free version even allows you to put indicators on your charts. Has a decent stock screener and links to all the press releases of the companies you’re trading.

Edgar Company Fillings : Can look up any company filing from any listed company in the US stock market. If you’re a trader that relies heavily on fundamentals, this site is your bible for trading. Even if your strategy does not focus on the fundamental aspect of companies it is worth using to look at the press releases of companies before the market opens to better understand the catalyst behind a stock that is gapping up or down.

Shortsqueeze.com: Website where you can look up the short interest and a lot of other useful information about a stock’s share structure, including the float and percentage of the float that is short. It is useful to consult this in addition to other sources like Finviz and Yahoo finance to check the accuracy of statistics like the float of a company, as many sites will often report different numbers for these statistics.

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This is something that’s easy to forget about when you’re in the zone. You’re focused on what’s happening right now because you know that great opportunities in this business may only last for a few minutes, right? A lot of traders find success thinking and working that way, but the best traders think of things a little differently. The top traders in the world have think outside the box when it comes to what will impact the market. That’s why we put together the infographic below. Our hope is that by showing you some of the less obvious variables in market behavior, you’ll start thinking more creatively about your investments and be more prepared when these events come back around over the next several years.

<i>Click image to see a larger version</i></br><a href=”https://bullsonwallstreet.com/world-events-review-using-day-trading-advantage”><img alt=”Famous Bulls Infographic” src=”https://bullsonwallstreet.com/wp-content/uploads/2014/05/world-events-in-review-using-day-trading-to-your-advantage-infographic.png” width=”540″ />World Events In Review</a> via <a href=”https://bullsonwallstreet.com”>Bulls on Wall Street</a>

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