This is a guest post from Tino @tradersreality. This article originally appeared on tradersreality.com and is reposted here with permission.
I’m sure every trader on their journey has experienced the novelty of Revengeful Trading. Firstly, what is Revengeful Trading?
As with anything in life, if something belongs to you and it’s taken away from you, you then develop a belief system that dictates that you are to seek and claim back what is rightfully yours. So if you are using your mobile phone, someone rushes up to you and snatches your phone from your hands, you have every right to challenge the thief and take back what is yours.
Why? Why? Why?
In Forex, many new traders experience a bad loss and they most likely say one of the following statements:
” That was my hard earned money, i want to make it back”
“I don’t deserve to experience this loss, what have I done wrong, I’m not a bad person?”
“That is not fair, my entry was fine, what did I do wrong to lose my money, ah man, my account is low, I have to trade to earn it back.”
To be honest with you, all the statements above, i have said them to myself many times. It is only natural, during the transition of developing your traders psyche, to ask yourself the above questions when something goes wrong with your trading.
Seek and You Shall Find.
Revengeful trading is like an infection, once it spreads, it will attack every element of your mind that maintains rational thinking.
How Do We Develop The Habit Of Revengeful Trading?
This post is not designed to promote how to become a revengeful trader, however highlighting the habits of behaviour that occur, creates awareness to traders that may or may not have experienced revengeful trading. Unfortunately, revengeful trading is like becoming old. It will happen one way or another. However, in Forex we can teach ourselves to avoid developing the habits that create the psychological behaviours which trigger revengeful trading.
What To Be Aware Of?
It is in every traders interest to pay close attention to their behaviour when they are experiencing difficulty in trading. I will share with you the habits I developed that created a mindset to be revengeful In my trading.
1) My motive for trading when i started out was MONEY. I wanted to experience the lifestyle of the “Wolf Of Wall Street”, I mean who doesn’t want to have the luxuries of making huge amounts of money and buying anything you desire. So every trade I made, I had the vision of making thousands.
Becoming aware of your behaviour is the first step.
2) When things went wrong, I would blame my methodology. I would even blame my internet connection, thinking that a delay in the trade execution caused me to not get the right price.
3)I would start to get angry if my position was not going in my favour. I would average down and convince myself that price would eventually return. I developed the habit of thinking that one way or another, price would return so I would sit through the draw downs. I mean hey, I was convinced it’s what the pros do…
4) There were times where I would become so frustrated with the markets (when I really should have been frustrated with my behaviour) that during a losing position, I would say to myself: “Ok Market, you ain’t gonna blow my account, you won’t get the best of me” I would enter such a large position that I would hit margin call instantly. During that moment, I would experience this wave of fear coming over me, I felt trapped, I felt so compelled to stay in the position I could not close it, then all of a sudden, price would go in my favour. I survived the price swing. I would convince myself I was genius trader.
I Was So Wrong…
“I created the belief that when I challenged the market I would be rewarded for it. ”
The 4 scenarios above, are a fine example of how a trader can develop their mind set to become revengeful when they trade.
Lets take scenario 4). The moment price started to go in my favor, I created the belief that, if I were to become revengeful, price would then go in my favour because “The market knew I was angry”. Man this was so detrimental to my trading. I created the belief that when I challenged the market I would be rewarded for it. I would repeat this behaviour thinking price would go in my favour. All it did was make my account hit margin call and wipe me out all the time.
The above scenarios no doubt will crush your chances of becoming a successful trader if you fail to recognize the importance of your beliefs you create whilst you are trading. Whether you want to trade for money or you trade because you want to fulfill an ego requirement, If you have these thoughts in your mind you will inevitably create habits that will make you behave irrationally. Be aware of the decisions you make and their outcome. Never assume, like i did, that if you are angry at the market, it will turn things in your favour. if you ever start to feel the following behaviours below, there is a good chance your going to start revenge trading:
- Taking short breaths
- Staring point blank at your screen.
- Becoming agitated
- starting to envision how you will feel if the position closes you out and your account is blown.
- What will friends and family say if you lose your account balance?
- You are so still that you can feel your heart beat.
If you start to feel the characteristics of the above starting to take place. STOP TRADING. Re-evaluate your motives for trading. Taking a break provides clarity.
If you are to start trading. Take it seriously. Educate yourself. You are learning a new craft, a new skill. No half measures. If you want to “have a go” at trading, you will have a better chance at succeeding at roulette.
I hope this post really touches base with how you can develop the habit of revengeful trading. Becoming aware of how easily the mind can be misled is the stepping stone to understanding what needs to be changed to improve your trading.
Trade Well Friends
Tino
You can follow Tino on twitter at @Tradersreality and visit his website at tradersreality.com.