Smart position sizing & risk management

Back to glossary
Risk Management

Revenge Trading

Emotionally-driven trading to recover losses, typically with larger size and less discipline: almost always makes things worse.

What is Revenge Trading?

Revenge trading is when a trader, after taking a loss, immediately enters new trades trying to "make it back": usually with larger position sizes, less analysis, and more emotion. It's one of the most destructive habits in trading.

Signs you're revenge trading

  • Increasing position size after a loss
  • Entering trades without your usual setup criteria
  • Feeling angry, frustrated, or desperate
  • Thinking "I just need one good trade to get back to even"
  • Trading through your daily loss limit

How to stop

  • Set a daily max loss: walk away when you hit it, no exceptions
  • Take a break after losses: even 10 minutes helps reset your mindset
  • Review your journal: most revenge trades violate your own rules

Related Terms

FOMO

Fear of missing out. The emotional impulse to chase a stock that is already running because you are afraid of missing the move, often leading to buying at or near the top.

Max Drawdown

The largest peak-to-trough decline in account value. Measures the worst-case loss experienced.