Trading Psychology: CBT Part 3

Revenge Trading


We have covered revenge trading in previous articles but now we are going to look at revenge trading and how we can use CBT as a solution to help prevent revenge trading. The biggest reason why we catch ourselves revenge trading is because we are emotionally invested in a trade. Here is a list of other reasons why we find ourselves revenge trading:


Our egos can be a problem when we trade, it can make us think we are smarter than the market. When we lose money, our ego gets bruised, so we try and get the money back to make ourselves feel better, but the money is gone – you won’t get it back.


The feeling that you are not where you want to be when it comes to trading. Maybe you gave yourself a goal to have a certain account size by a certain point in time and it’s not there yet. So you over trade to try get there quickly, or you start trading too big and you end up blowing your account.


Wanting to grow your account quickly so you put in large trades with high risk, you then lose that trade and end up putting in a bigger trade to try make the money back. You will most likely take a loss on that second trade because you aren’t focused anymore and your motivation has changed – this is how you will blow your account.

Bad habits

This can be a range of things from emotions or getting emotionally invested in a trade, not walking away from a trade, or trying to take every trade there is. Whatever your bad habits are, they either lead to revenge trading or if you have fixed them they come back once you start revenge trading.


Think about your psychology and the type of person you are, what makes you tick? Now figure out why you revenge trade and be very honest with yourself, it’s the only way to get to the bottom of it to find the best solution.

Revenge trading is an easy cycle to fall into and if you are not able to get out of it you will most likely blow your account and your emotions will be all over the place. Here are some good tips to help you in case you find yourself revenge trading:

Cut your risk size down – if the risk to reward is not good then don’t take it.

Implementing the 3-strike rule, 3 bad trades mean you’re out and it’s time to take a break.

Figure out what sets you off and causes you to revenge trade

What reward are you getting from revenge trading?

The negative reward is that you feel like you got back at the market

Replace the negative reward with something positive (walk away and do something you enjoy – not only will this keep your mindset positive it also replaces the negative reward with something constructive).

Increase your heart rate, studies have shown by increasing your heart rate you are able to make more rational decisions.

Look at your environment, having a positive environment allows us to have a positive mindset, we feed off energy.

Remember the odds of winning the lotto, The chances of you winning the lotto are one in let’s say 30 million. That is about the same as you getting a positive outcome from revenge trading, keep that in mind.

The market is not a living thing, so for you to think that by revenge trading you are hurting the market is a big mistake, because the market still carries on.

Ryan Mowatt, The Performance Coach

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