A lesson in Revenge Trading
"Cut your losses short, but let your winners ride!"
We have heard that quote, one and a million times, it's one of the first things you hear when you start trading, a quote almost as known as
"Buy low, sell high"
And why is it so important and so widespread?.
The reason is pretty simple: You need to make more on your winning trades, to compensate all your losses and still make a profit.
Sounds pretty simple right?
Your win ratio and Risk to Reward are your most important stats,
Well it's easier said than done, and today I learned something about that coupled with revenge trading.
But what is revenge trading?
It's as simple as looking to make quick profits in a quick and aggressive way, after suffering losses, revenge trading also involves forgetting your own trading rules and risk management.
Anyone experienced trader can tell you the same, revenge trading is one of the worst things you can do and one of the fastest ways to losing your ENTIRE ACCOUNT
You can wipe out, months and even years, of savings and trading profits in a manner of hours or even minutes.
So when you take a loss, you should step away for a while, review what you are doing and get back in the game with a clear head.
In this case, I didn't take losses, I actually did make some profits
BUT I was angry that I didn't make all the profits from the top to the actual bottom.
So I revenge traded, even though I was up quite well in the day.
Instead of even following my own earlier analysis (linked below) I decided that the best way to make quick profits, was by trying to time the absolute bottom and get a high leverage long in there.
Not only I was increasing the leverage I was also increasing the risk, by trading against the trend and trying to time the exact moment the market reversed.
I didn't manage as you can see in the chart.
The lesson is pretty simple: Don't ever revenge trade and don't let good trades that weren't perfect enough make you become irrational.
I could have pretty good profits today, but I let myself become my own worst enemy.
ALWAYS PRACTICE RISK MANAGEMENT, RISK MANAGEMENT IS VITAL TO TRADING
We have heard that quote, one and a million times, it's one of the first things you hear when you start trading, a quote almost as known as
"Buy low, sell high"
And why is it so important and so widespread?.
The reason is pretty simple: You need to make more on your winning trades, to compensate all your losses and still make a profit.
Sounds pretty simple right?
Your win ratio and Risk to Reward are your most important stats,
Well it's easier said than done, and today I learned something about that coupled with revenge trading.
But what is revenge trading?
It's as simple as looking to make quick profits in a quick and aggressive way, after suffering losses, revenge trading also involves forgetting your own trading rules and risk management.
Anyone experienced trader can tell you the same, revenge trading is one of the worst things you can do and one of the fastest ways to losing your ENTIRE ACCOUNT
You can wipe out, months and even years, of savings and trading profits in a manner of hours or even minutes.
So when you take a loss, you should step away for a while, review what you are doing and get back in the game with a clear head.
In this case, I didn't take losses, I actually did make some profits
BUT I was angry that I didn't make all the profits from the top to the actual bottom.
So I revenge traded, even though I was up quite well in the day.
Instead of even following my own earlier analysis (linked below) I decided that the best way to make quick profits, was by trying to time the absolute bottom and get a high leverage long in there.
Not only I was increasing the leverage I was also increasing the risk, by trading against the trend and trying to time the exact moment the market reversed.
I didn't manage as you can see in the chart.
The lesson is pretty simple: Don't ever revenge trade and don't let good trades that weren't perfect enough make you become irrational.
I could have pretty good profits today, but I let myself become my own worst enemy.
ALWAYS PRACTICE RISK MANAGEMENT, RISK MANAGEMENT IS VITAL TO TRADING
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