Why Mistakes Multiply
Mistakes in trading rarely happen in isolation. One emotional decision often leads to another. That’s why recognising and preventing early missteps — like revenge trading mistakes — is so important. It keeps you from spiralling into a cycle of bad trades and emotional reactions.
1. How Impulsive Actions Deepen Losses
After a loss, it’s natural to want to make the money back quickly. But when that desire turns into impulsive, poorly thought-out trades, it’s called revenge trading. These revenge trading mistakes often ignore setups or risk management rules, leading to deeper losses.
2. Overconfidence After Wins
Winning streaks can be just as dangerous as losing ones. After a few successful trades, overconfidence can creep in. You may start taking larger positions, skipping confirmation signals, or abandoning your stop-loss. This sets the stage for a significant loss.
3. Ignoring Your Plan
If you’ve built a strategy and suddenly decide to deviate from it mid-trade — because you “just have a feeling” — you’re making a common mistake. A trading plan only works if you stick to it consistently, not just when it’s convenient.
Quick Example
After a $200 loss, a trader jumps back into the market with double the risk, thinking they can “win it back.” The second trade loses too. Had they paused, reviewed their strategy, and waited for a better setup, they could have preserved capital and composure.
How to Avoid These Mistakes Revenge Trading Mistakes
- Use a cooldown rule: After a loss, wait 15 minutes before entering another trade.
- Track emotions in your journal: Note how you felt before and after trades.
- Set position size caps: Never increase trade size based on emotion or recent results.
Key Takeaways
- Emotional mistakes often come in pairs or clusters
- Revenge trading mistakes and overconfidence are common traps for beginners
- Sticking to your plan protects you from emotional swings
Next up: Common Trading Mistakes: Part Two