Identify your trading triggers
This might sound like a strange one, but there will likely be 'trading triggers' that occur for you personally whenever you're about to make a big trade. It could be completely unrelated things such as 'snacking excessively', consuming a lot of coffee etc.
Pay attention to the things you are doing and thinking when you are about to make big trades. By understanding and controlling these 'triggers', you might be able to avoid revenge trades, by identifying the 'warning signs'.
You could keep a trading 'log' or 'journal' that keeps track of such things. This way, you could refer to this on a regular basis in order to remember and reassess your behavior during trading sessions.
Revise the trading system
If you don't have a trading system, that's your first mistake. But if you do have one, spend time figuring out why the system failed you in this instance. Perhaps it was your use of the strategy that led to the loss, or perhaps you need to use an entirely different strategy in order to achieve success in the future.
You can figure this out by looking at basic questions such as: Is this system working? Have I made winning trades in the past by using it? If you had followed the strategy completely (through the losing part and onward), would it have made a difference? Could it have been better if you had stuck with it?
You might be tired of hearing these two words by now, but risk management is what separates the very best traders, from the rest. Even if an upturn might be on the horizon, the top professional traders know exactly the point at which they need to end the trade.
This is the best way to avoid revenge trading. Know exactly when you should continue, and exactly when you should pull out of the trade. Stick to your risk management strategy strictly, and you'll avoid huge losses. By implementing proper risk management, you can potentially maximize your potential of winning, and reduce your chances of losing.
No one wants to lose, and everyone can identify with the euphoria of winning. But remember, trading deals with numbers. Numbers are absolute, and therefore, your emotions cannot change them.
You must have your ego in check, and be in complete control of your emotions during a trade. By doing so, you'll be one step ahead of the markets, and you'll know when it's the right time to push forward, and when it's the right time to walk away.
The markets are not against you, and you must never take losses personally. This is why there are so many trading articles on 'trading discipline', because maintaining control of yourself is equally as important as the trading strategies you use. After all, your mindset will determine your actions.
Testing your strategies
If you feel confident enough that you have understood revenge trading and how to avoid it, the next sensible step for you might be to test your strategies out with a demo trading account. Demo trading accounts are not just intended for beginner traders either!
If you are regularly testing out different strategies, it's completely logical to do so in a risk-free trading environment first, before moving to the live markets. We wish you a good trading luck and looking forward to see you trading with us.
Want to get more prepared for real trading? Read our article about position sizing on Forex.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.