How to stop revenge trading

Most traders don't call it revenge trading while they're doing it. They call it getting back in, or the market owing them one. These are the signs I look for when I go through a student's trades.

• A trade taken within a few minutes of a loss
• More size than the trade before it
• A setup that wasn't in the plan you wrote before the open
• A stop that's wider than normal, or moved, or missing
• The same market in the other direction, straight after being stopped out
• The thought: I just need to get back to breakeven today

One of these on its own can be fine. Two or three together, right after a loss, is revenge trading.

A loss shouldn't feel personal, but it does. You had an opinion, you put money on it, and the market said no. For a lot of traders that feels like being told they're wrong, and nobody likes that. The revenge trade is an attempt to prove the first idea was right, or at least to make the feeling go away.

The other part of it is the scoreboard. If your day's P&L is how you judge yourself, a red day feels like a bad day as a person. So you do whatever it takes to get it back to green before the close, and that's exactly when you take the worst trades of the week.

The fix is to change what you judge. The market doesn't know you exist. A loss taken exactly to plan isn't you being wrong, it's the cost of trading your system, the same way a shop pays rent. So grade the decision, not the result. A stopped-out trade that followed your plan is an A. A winning trade that broke your rules is a D. Once you grade like that, a red day where you followed your plan is a good day, and there's nothing to get revenge for.

Every habit has the same shape. Something sets it off, you do the thing, and you get something out of it. With revenge trading, the loss sets it off, the quick trade is the thing, and the relief of doing something is what you get out of it.

The dangerous part is that it sometimes works. Every now and then the revenge trade wins and the day ends green. That's the worst thing that can happen, because it teaches you that it works. You remember the one time it saved the day and forget the five times it made it worse. That's why it's so hard to quit.

Habits don't break because you promise yourself something at night. Telling yourself you won't do it tomorrow never works. They break when you change what happens right after the trigger, and when you make the old behaviour harder to do. Every time you take a loss and follow your rule instead of clicking, the habit gets a bit weaker. That's slow, and it's the only way I've seen it work.

Right after a loss is the worst possible time to make a decision. You're annoyed, you want it back, and your judgement is at its lowest. So don't make the decision then. Make it before the open, write it down, and follow it when it comes up.

These are the rules I start students with. Change the numbers to fit your size, but keep the shape.

Set the daily stop at about three to four times your normal risk per trade. If you risk $60 a trade, stop for the day somewhere around $200 to $250. That way one bad morning can't turn into a bad week.

If your broker or platform lets you set a daily loss limit that locks you out, use it as well. A rule you wrote is good. A rule the platform enforces is better, especially on the days you'd talk yourself out of the written one.

This is the part most guides skip. Here's what I tell students to do in the first minutes after a loss, in this order.

• Take your hand off the mouse. Nothing good happens in the next sixty seconds.
• Write one line in your journal: what you lost, and whether the trade was in your plan.
• Stand up and leave the room. Fifteen minutes on a timer.
• When you come back, read your plan before you look at the chart.
• If the next trade isn't one of your setups, it doesn't exist.
• If you're still angry, you're done for the day. That's not quitting, that's following the rules.

It sounds too simple. It works because it puts time and a written plan between the loss and the next click, and that's all revenge trading needs to lose its grip.

Most traders know they revenge trade. Very few know what it costs them. When you don't know the number, it's easy to tell yourself it's not that bad.

• After the close, go through your trades and tag every revenge trade honestly. If you're not sure, it probably was one.
• At the end of the week, add up the P&L of every tagged trade.
• Put that next to the average of your clean trades, the ones that followed your plan.
• Look for what set them off. The time of day, a big loss, a move you missed, a green morning you wanted to protect.
• If revenge trading is your most expensive mistake, make it the one thing you work on next week. Nothing else.

Evals punish revenge trading harder than anything else. A trailing drawdown doesn't care that you were up two weeks in a row. One loss, a bigger trade to get it back, then a bigger one, and the account is gone before lunch. That's how a lot of evals end. If you're trading one, read how to pass a prop firm evaluation. The sizing and daily stop in there are built to make a revenge spiral impossible to finish.

Actal is built around exactly this. You set your rules once: a daily loss limit, max trades, a cooldown after a loss, stop after a number of losses in a row. Every trade you import from your platform is checked against them, so a trade taken three minutes after a loss shows up as a broken rule, in red, on the day it happened.

When you review, you grade each trade on how well you followed your plan and tag revenge trade as a mistake. Actal keeps a running dollar cost for it, and if it's your most expensive mistake it becomes your focus for the week, with the count right there on the dashboard. You can also add a friend or a group who can see your journal, which makes it a lot harder to pretend Tuesday didn't happen.

To be clear, Actal is a journal. It doesn't block orders on your platform, so use your broker's daily loss lock for that. What it does is make the habit impossible to ignore. It's free while it's in beta. If you'd rather start on paper, the free journal template has a mistake column and a cost table.

Some traders fix this on their own with rules and a journal. Others know exactly what they should do and still don't do it, because the habit runs deeper than the rules. That's normal, and it's usually easier to see from the outside. Going through the trades with someone else, every day, is what works for a lot of people.

That's what I do at Jusell Trading Academy. I work one-on-one with a handful of students at a time, and building habits and structure is a big part of it. If you're not sure whether a mentor is worth it for you, I wrote about that here.

I'm Joakim. I trade index futures full time and coach traders one-on-one at Jusell Trading Academy. Revenge trading comes up with almost every new student, and the rules and routine on this page are the ones I give them. Actal is my product.