When you get mad at the market and try to get your losses back in an emotional way instead of a rational and logical way you are viewing the markets through your emotional filters and it is not the best state to be trading forex. If you are frustrated and angry, you are just going to make trading mistakes that will most likely cost you more money and that is the revenge trading in forex which should be avoided at all costs.
Many people are confused at why revenge even comes into play during trading. But it’s really very simple. Think about gambling, for example. You can only lose what you decide to bet. When you bet the money, it’s easy to take responsibility for your losses because most likely you had to actually physically place the bet on the table, and you can only lose what you decided to risk.
Let’s look an example: Let’s say you lose 35 Pips in the last trade. Will 20 Pips profit be enough in the next trade? The market may be clearly telling an objective observer that’s all there is in this trade (20 fx Pips). But to the person who just lost forex 35 Pips, 35 Pips is what they will see in the markets, the trade rallies 20 Pips they hold on for a bigger gain and it reverses ending up 20 pip loss, adding to the earlier 35 pip loss. Now we are in a state.
But let’s think about this. Does one trade really have anything to do with the other? The market doesn’t know or care how much you made or lost in the previous trade. It has no bearing whatsoever on your next trade or your next fifty trades. One trade has nothing to do with the next trade. They are not related in any way, other than in your own mind, you almost have to be Zen like, present and in the now moment. Attempting to get back in one trade what you lost in the last trade doesn’t make any sense. You can only profit from what is available in front of you. And again, the opportunity or lack of has nothing to do with your last trade or last three trades.
When you feel compelled to get back what you just lost. The flight or fight mechanism kicks is, your survival instincts as money now a days is very much attached to our survival. We move from the pre-frontal cortex to the reptilian part of the brain and become highly emotional. You want to flow with the market, not fight it. You can’t fight it, because you can’t win that way. You can’t change what the market will do. You can only change yourself. So, avoid Revenge Trading in forex and being emotional when doing forex trades!
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