The emotional behavior of making impulsive, often oversized trades immediately after a loss in an attempt to quickly recover the lost money. Revenge trading is driven by frustration and anger rather than analysis and strategy.
Why It Matters
- 1Revenge trading is one of the top account killers in prop trading.
- 2After a loss, the emotional urge to 'make it back' leads traders to abandon their strategy, increase position sizes, and take setups they would normally skip.
- 3This almost always compounds losses because decisions are emotion-driven rather than plan-driven.
- 4In a prop firm context, revenge trading after hitting 50% of your daily loss limit often results in hitting the full limit within minutes.
- 5Having a rule to stop trading after a set number of consecutive losses is essential.
Example
- 1You lose $1,500 on your first trade of the day on a $100,000 account with a $4,000 daily loss limit.
- 2Frustrated, you double your position size on the next trade, which also loses $2,000. Now down $3,500 and desperate, you take a third trade with maximum size and lose the remaining $500, hitting your daily limit.
- 3Three revenge-driven trades burned through your entire daily allowance in 30 minutes.
Common Mistakes
- ✖Not recognizing revenge trading in the moment — it feels logical when you're emotional
- ✖Not having a daily loss circuit breaker (e.g., stop after 3 consecutive losses or 50% of daily limit)
- ✖Blaming the market instead of recognizing that the emotional response was the real problem