investing guide

Revenge Trading

revenge trading

When you first start investing you may be surprised how emotional trading can sometimes be. I myself will admit, when I first started trading stocks the roller coaster ride took a toll on me, and led me to do stupid things like revenge trading.

Revenge trading simply means your emotions have gotten the better of you and you have thrown out common sense. When you start trying to hard to get back losses you have incurred when trading by rushing into wild random trades you will have fallen victim to revenge trading.

Honestly, in my opinion, the easiest way to avoid falling victim to revenge trading is to set some solid guidelines that you will stick to without hesitation.

(1.) As soon as you make a trade put in your stop-loss order. Do NOT rely on yourself to control your losses let a stop-loss order do it for you. Too many people fall victim to the old methodology that when a stock is going down it will eventually have to come back up. So they hang to a stock that simply keeps going down and down and down. A stop-loss order prevents this from happening and keeps your losses small so you can use your money to invest in more winners than losers.

(2.) The other important lesson is to take your time when picking stocks and making trades. I think to many people, including myself when I first started, feel they have to be in the game all the time otherwise they will be losing out on money. Just remember the stock market will be there tomorrow and so will another great stock pick. Never let your emotions or anything else make you feel like you have to make a stock trade today right at this moment.

When trading stocks you have to accept the fact that NOT every stock you pick is going to be a winner. So the trick is to control your emotions and get rid of the losers with small losses and then move on without regret.