What is Crypto Revenge Trading? 4 ways to avoid revenge trading

Revenge trading is common, especially among those involved in derivatives trading. Short-term derivatives traders benefit from multiple trading opportunities and have the potential to make a lot of profit in a short time. Making too many short-term business decisions exposes them to short-term gains and losses. They can easily become so overwhelmed by losses that they start making emotional decisions, including revenge trading. Let’s take a quick look at revenge trading and how you can overcome it.

What is revenge trading?

When you lose money in a trade or business, it’s normal to want it right away and try to take immediate action. The desire to get your money back can make you act illogically and can lead to further losses – trying to get it back is what revenge trading is all about.

Crypto revenge trading as described above is a move to compensate for bad losses or lost trades by making irrational decisions that go against your trading plans. They often end badly and lead to bigger losses or even a complete loss of all the funds in your portfolio.

Revenge trading is a very bad trading practice. It is characterized by impulsive and emotional trading without any analysis to support the move. It often occurs during losses or after a big loss, and every trader goes through a time when they are pushed to do it. Revenge trading is one of the leading causes of failure among traders.

Features of revenge trading

Every trader, at one time or another, has had to deal with the desire for revenge or has succumbed to it. The trader first incurs a loss, then cannot afford it and seeks to recover it as soon as possible.

When you practice revenge trading, you trade based on your emotions, neglecting your proven strategy. With this action, you will surely lose your money and even all the funds in your wallet. When you practice revenge trading, forget about your trading plans, such as entry and exit levels, even if they have produced consistent results in the past.

Another common thing during revenge trading is that risk management is usually not respected as you are looking for ways to beat the system and make up the big loss in a short time.

Losses from revenge trading can cause you to lose confidence in your trading skills. The huge losses that result can make you lose confidence and it can take you a long time to recover from such a state of mind.

What causes revenge trading?

We mentioned that revenge trading is usually triggered when traders have losing streaks or large losses. The loss causes the trader’s emotion to go off his plan. This emotion can be the sudden fear of losing your account or the desire to make a lot of profit after a loss.

Anger and overconfidence can also lead to revenge trading – anger at losing a trade or overconfidence in one’s strategy, causing you to execute trades with a much larger, significant position than you would otherwise. you had received

The cryptocurrency market is uncertain and volatile. The fact that there is a drop in price does not mean that the price will not rise quickly. However, inexperienced traders get depressed by setbacks forgetting that things can turn around in the next trading opportunity. They are always tempted to take the plunge and risk more than they would have done without those temptations.

4 ways to avoid revenge trading

Here are ways to avoid revenge trading.

1. Always keep the plan

The chances of attempting a revenge trade are minimal if you consistently stick to your trading plan. If you have a proven trading strategy, trading it should only produce the results you expect or at least some form of consistency that will keep you in the game for a long time. So when you experience a loss, it is only an expected percentage of your portfolio balance. Your earnings should also be within the expected range.

It is normal for people to want to recover the loss immediately, but trying to do this in the market is somewhat risky and leads to losses. Trades should only be executed based on predetermined conditions which you should have documented in your trading plan. Anything outside of this causes you to lose discipline as nothing guides your decision making process.

Trust the system you have created and don’t worry about losses because with a good system the numbers stack up in your favor.

2. Learn to accept losses

There is no holy grail in trading. The holy grail is to have a proven trading strategy and follow that strategy with good risk management. Accepting the fact that no matter how good your trading strategy is, there will be times when you will experience losses will help you approach the crypto trading market better.

You do not need to move your stop loss to calculate the possibility of a loss trade reversal. The stop loss should be there to help you get out of trades that are already going against your plan, as it ensures that you don’t lose more than the amount you set.

3. Document your transactions

Keeping a log of your trades will make you a more disciplined trader. If you keep a log of your trades, you can see why you are executing each trade and whether you are trading according to your plan.

Documenting your transactions will also help you learn from your mistakes, as they will also be documented. This will help you better manage losses and mistakes.

4. Take a break from your trading activities

Taking a break from trading is one way to avoid revenge trading. You may need to take a break after making a series of losing trades. Stopping allows you to understand what went wrong or if the market is just the market.

Only resume active trading when you feel your mind has healed and you are in your best mental state. You should also always know that losses are an inevitable part of trading.

Losing is part of the game

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Even the most skilled and profitable traders have difficult days and weeks. Having losses does not necessarily mean that the market is against you or that your system is broken. The cryptocurrency market is volatile and you don’t control it. You should focus on trading as you see fit and as allowed in your trading plan and strategy.

To have confidence in your strategy, you need to test it again over time. A well-tested strategy increases your confidence in it. So when you have losses, you know that the market is just the market, and losses are always part of the game.

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