A very common problem among traders is Revenge trading. It’s when a trader continues to trade although he knows he should shut it down for the hour, day, or longer.
This almost always works like the snowball effect. First, the trader loses a trade or two and starts thinking (consciously or sub consciously) that he is down and needs to make the money back. Next, he starts to take more and more trades that often don’t fit his trading system’s trade criteria. The more he trades, the more frustrated he gets. Before he knows it, he’s lost 8 out of 8 trades and can’t find a reasons why he took the trades in the first place!
I’ve been here and I know how frustrating it can be. In the past, there have been times where I was up 4 or 5 days in a row, then gave back half the weeks profits on a “revenge day”.
The only way to get past this is by continuously focusing and working on your discipline as a trader. It’s not a sexy answer with a quick fix, but definitely takes time and effort. The rewards are way worth the effort. It’s such a great feeling to trade effortlessly- to be in the flow with the market and executing like a pro! To get there, you only need two simple little things:
1. A strategy that shows a potential “positive expectancy” – In other words, that you expect to make money over time.
2. Confidence in your ability to execute the strategy.
Remember, there is no holy-grail to trading other than the 6 inches between your ears. Stop focusing on the latest and greatest hype and start paying attention to your thought patterns and trading plan.
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