Have you ever gotten mad after losing on a trade? Who hasn’t, right? The thing about trading in crypto is that your mindset can make or break you and your strategy. Analyzing charts and signals, reading up on fresh projects, checking in on forums - that’s just half of what you need in order to succeed with any investment. The other half is the psychology behind trading, and it can be the divider between mediocre and great traders. No matter what your strategy is, the key is to stay consistent. Stick to your guns and discard your emotions even when everything looks bleak. The moment you hesitate because of a loss is also the moment your feelings can get in the way: fear, frustration, anger, or even desperation can rear their ugly head. And nothing good comes out of either of those things, especially with your eyes glued on your screen, trying to catch up with your losses. There’s one typical trigger response that is probably one of the scariest reactions - but what is revenge trading? It is a psychological state where a trader, after a losing trade, tries to quickly recover his losses, leading to poor decisions influenced by emotions, deviating him from his trading strategy, and making irrational choices, such as doubling down on a trade, which can result in even greater losses. You have lost enough already, but you are poised to win it back. Anger, paired with desperation, pushes you into a spiral that rarely wins you back anything from your initial losses.
Why Do People Revenge Trade
As you’re reading this article, you might wonder: why can’t people just stop the downward spiral? Why do people revenge trade? Because they want to ‘get back’ at the market for their losses with an end goal of getting even. They jump back in, not with a clear strategy, but with the gambler mindset of "I just need one good trade to make it back." It’s like going all in at the poker table not because the cards are right, but because you’re pissed at losing in the previous round. Instead of going nuts and risking it all, you might as well take a breather, fold this round, and get your ducks in a row for the next one. The worst part about revenge trading is that people will not even admit to doing it: they will justify their actions with anything just to legitimize investing more into risky projects. The psychology is simple: you need to win this back now. But the way you rationalize it to yourself and your surroundings is far from simple. We hear a lot of these at PlasBit, so we collected a few way-too-common self-justifications:
- I can’t end my day in red. Yes, you can. In fact, sleeping it off is probably the best thing you can do after a disastrous day of trading.
- This next project is about to hit. No, it won’t. The gambler’s logic dictates that since you’ve been having an unlucky streak, the next investment will surely make up for your losses. In reality, you can lose 100 times in a row if you’re not thinking with a clear mind.
- This new setup will work. Again, it won’t. The worst thing you can do is ditch your existing strategy and start a new tactic without giving it a deeper thought.
- I’ve learned my lessons, I’m okay. No, you aren’t. Don’t jump back too quickly just because you think you have learned your lesson.
Tackling revenge trading right before it would happen is key, but let’s see first some of the preemptive measures you can take.
How To Stop Revenge Trading
Just before you lose big time and your emotions take over you, you can take a few steps to avoid a complete meltdown. Here’s how to stop revenge trading, you can avoid this by setting clear trading limits, such as defining a loss limit before you start trading when you’re still in control. This will help you stay disciplined even when your emotions try to take over by preventing you from trading beyond your set limits. As a result, you'll avoid impulsive decisions and reckless trades in an attempt to recover losses immediately. Minimizing further losses and avoiding emotional reactions is crucial. While there are dozens of tips to help you avoid disaster, discipline is the name of the game.
Revenge trading is a result of your emotions letting control your decisions
Maintain Your Trade Discipline To Avoid Revenge Trading
The lack of discipline in cryptocurrency trading will always lead to failure, and, eventually, losses. Now that you know what is revenge trading, here is a collection of precautionary measures you can take to prevent it from happening:
- Take a break. Give your ego a breather. Just by taking a 15-minute break, you can reset your emotional state and help yourself think more clearly before jumping back to trading.
- Keep a journal. No, really. Keep a trading journal where you identify what happened, how you felt, and how you acted upon the loss. This can help you identify faulty patterns in your trading strategy.
- Quality over quantity. Try to reduce the number of projects you invest in. Trying to make up for your losses immediately by piling up more projects leads to even bigger losses.
- Aim for smaller position sizes. While it doesn’t help you win everything back, small position sizes can rebuild your confidence. Even better, it helps you avoid a downward spiral.
- Stick to a schedule. Make trading part of a habit, but do not let it control your life. For instance, if you make better decisions with a cool head in the morning, don’t start frantically investing after a long day just because you are losing.
- Don’t force. If your strategy is not working, don’t keep pushing yourself over the edge. Know when to stop and recognize when you need to tweak your approach.
- Don’t abandon tried & tested tactics. Leave passing trends and high hopes of big investments for the reckless. Put your trust in strategies that have stood the test of time.
- Losses are inevitable. No one broke the bank without a few sob stories to tell. Trading, even if your strategy is executed to the letter, is a rollercoaster ride with coveted highs and inescapable lows. Embracing this fact will make you a level-headed trader.
- Keep a log. Marking down all your trades can paint an accurate and cold, data-based sum of your moves, helping you spot holes in your strategy.
- Self-reflect. Tying into journaling and giving yourself time for self-reflection are important. Analyze what contributed to the loss, identify holes in your strategy, and set a plan for making improvements.
- Refine your strategy. If your strategy leads to repeated losses, maybe it’s time to rethink things from scratch. Don’t get too jumpy just because “it’s supposed to work”. If you were scalping a lot recently but it got you losses constantly, perhaps you can try something less impulse-based like breakout trading.
A simple log of your trades works miracles
Naturally, you don’t need to do it all. If you prefer self-reflecting with a fellow trader rather than keeping a journal, that’s fine. You can also deploy a few crypto trading tools to master your trading and keep your emotions in check. The key here is having discipline and then sticking to your guns no matter what. This lets you have control over your emotions even in the face of adversity, which then helps you avoid revenge trading as well.
The Rule Of 90
If you’re relatively new to crypto, the rule of 90 is a warning sign you should always remember in the first 3 months of trading. If you like, it’s a preventive measure to help you from revenge trading when things go south. As a rookie trader, the rule of 90 suggests that there’s a 90% chance you’ll lose 90% of your capital in the first 90 days of trading. While this might sound like an oversimplification of the matter, it illustrates accurately how tough it is to get started and be successful in trading. Revenge trading is but one of the main reasons behind beginners losing big. The lack of education in the field combined with a faulty strategy, could also contribute to huge losses. On top of that, setting unrealistic expectations can easily send you spiraling down. As the rule suggests, it’s almost inevitable to lose big, but if you want to belong in the 10%, here are a few considerations:
- Forget getting rich fast. You’re chasing data, not dopamine. Getting a positive balance is a long-term goal. Successful traders don’t make fortunes overnight based on a whim.
- Take small risks. Invest only a tiny bit (less than 1% of your capital per trade max). Most beginners YOLO and then find themselves in a hole.
- Emotional discipline. This is key, especially to avoid revenge trading. If your fuel for trading is emotions like fear, despair, and greed, you’ll find yourself in the red fast.
- Try a demo account. You can practice your skills and your reactions in real time without worrying about your capital. Demo accounts are great for mastering your skills and emotions at the same time.
The moment you lose control, you can lose big. Next up is a collection of stories where people - beginners or veterans - found themselves in a pickle.
Use Case: How Revenge Trading Looks in Action
If you’re prone to recklessness and have revenge traded before, this fictional use case will serve an all-too-familiar situation. If you’re one of the lucky ones who has already mastered their emotions, our example will show you the dangers of revenge trading and how it could send you downspiraling.
- Imagine a fictional crypto project, $PTB. A trader purchases 1,000 for $100,000 hoping for a moonshot. Things don’t really go as expected: $PTB’s value drops by a staggering 50% and the losses are massive.
- Our trader is now down to $50,000 after a week of trading. He gets frustrated: instead of doubling or even tripling, he’s lost half of his investments.
- Fuming, he’s now depositing another $100,000 on the very same day. Win back no matter what.
- $PTB, in the meantime, seems to ignore our trader’s pleas and plummets by 30%. Our trader has already invested $200,000 and thanks to the downward trend, he has already lost $125,000.
- As the project keeps dropping, he keeps buying, trying to make back all his losses as fast as possible. His emotions are getting the best of him. He keeps investing as he keeps pushing the goalposts: he’s certain that a specific amount of $PTB will get his money back, or even yield some profit.
Barring a miracle comeback, $PTB will never make up for our trader’s investments. Sure, we all know how high-risk crypto is, but in this example, he easily loses $100,000-200,000 or even more. And while it already looks disastrous enough, it can get much uglier if he decides to “win back” everything by investing in other projects. So what would have happened had he heeded the PlasBit tips on avoiding revenge trading? The worst case would’ve been losing $50.000 before stopping altogether. This might’ve resulted in a negative day, but he could’ve used his time to reflect on what went wrong, gone back to the drawing board, and gotten back the day after with a sound strategy. This could’ve gotten him the lost 50k as well as some profits. Instead, he’s found himself in a very big hole to climb out of.
Real-Life Revenge Traders: A Few Cautionary Tales
Remember when we wrote that revenge trading happens too often? If you’re keeping up with crypto forums and Reddit, you’ll find woeful tales where traders lost fortunes just because they let their temper get the better of them. We picked a few (not just crypto) to show what is revenge trading and that it can come in many shapes and forms:
- $26,000 in 20 minutes. Brian1303 from Reddit tells about trading on SPX. He self-reportedly dished out and lost over $26,000 in about 20 minutes as prices dropped by 100 points in 45 minutes.
- Hero to zero. BabaYugah1 tells about a friend who invested in TSLA options in mid-2020, back when the market was pumping. He made $70k in one month. He was looking at properties and retirement but then lost $32,000 in a month. And right before Tesla's battery day (this is when the company announced its plan to get rid of Cobalt in its batteries and to manufacture its own “tabless” batteries, called 4860 cells), the trader bought $32k of 1-DTE call options. TSLA tanked, and our hero literally went to $0. Can it be worse? He allegedly took out a personal loan for each investment - first from a bank, then from his parents.
Tesla stock prices put holders on quite the rollercoaster in the past 5 years
- $12,000 lost on BTC. Our anonymous hero had all his life savings in BTC but got greedy as the price rose to maximize gains. He first lost a bit, but then, in true revenge-trading fashion, he started to lose even more as he took bigger risks. Much to his dismay, he still can’t grasp why he lost everything as he has been keeping his savings in BTC for years.
- $100,000 loss. Also on SPX, Redditor VanYikes lost big on a Yen carry trade, believing news reports about a looming war. In hindsight, he should have just rolled it out for another week at about $3,000 debit per contract, essentially taking a $30,000 hit. Instead, they closed position for a $100,000 loss.
- $40,000 on NVDA. A day trader who goes by the username gagdude on Reddit kept doubling down on NVDA puts during its run-up in 2024 from late May to mid-June before the split (so contracts were $2,000-3,000 each). The trader ended up losing over $40,000. He had just started trading options and felt good after the first win, which eventually led him to the loss.
- $0 instead of $27,000. NickG63 tells a woeful story when he turned $500 into $18,000 in 3 days. On the 4th day, he grew it further to $27,000 before a rapid market reversal dropped him down to close at $12,000 by the end of the day. It was all gone within another 2 days. He didn’t pull out a dollar even when the cash balance would’ve let him pull out as much as $14,000 at the start of that 3rd day.
Most agree that such stories, as scary as they read, should translate into learnings and building strategies to avoid revenge trading in the future. Nobody wants to lose tens of thousands, but if that’s the price you have to pay to finally learn why revenge trading is bad, then that’s the price tag of your lesson.
Revenge Trade Meaning: Untying the Phrase
Bad trading is about picking vibes over discipline: it’s the immature behavior that overrides sound strategy and a locked-in mindset. In more concrete terms, here’s revenge trade meaning, it’s when a trader, frustrated after a losing trade, jumps back in too quickly, trying to "win back" their losses. Instead of sticking to their plan, emotions take over when panic, frustration, and maybe even a little ego. Then, the trader starts overtrading, taking riskier bets, or doubling down on bad trades. Ditch risk management principles, market indicators, or your current crypto momentum strategy; you just need to win back everything you lost. Look for the riskiest project, shell out at least as much as (if not more) you lost, and win back everything as fast as possible. Even worse, you’ll try to make profits - eventually, before your epic loss, you were going to make some money with your investment, right? So, what is revenge trading? It’s giving way to emotions at the worst moment; it’s all about immediate loss recovery without strategy. Sadly, it’s a widespread phenomenon, so understanding the reasons behind it could serve as a lesson to hot-headed traders.
Revenge Trading: The Takeaways
We’re not robots, and our emotions take the best of us from time to time. In the crypto world, though, now that you know what is revenge trading, it’s best you lock out your emotions. The volatile nature of projects means that you can easily follow the hype or pump just because of FOMO. This is why at PlasBit we believe if you’ve invested in a project where the price suddenly drops, it’s best to cut your losses early before things get worse. It’s always better to lose some of your investment than twice or three times the entire sum. Sticking to a clear strategy and following risk management rules will help you avoid expensive mistakes and make smarter trading decisions while keeping a cool head will eventually yield the results you’re after.
