EP 098: How to Avoid “Revenge” Trading

This past couple of weeks, the market has been very volatile. When it's up, it's up big and when it's down, it's down big. 

I took a couple losses, but I definitely have the vision of "If its up, buy calls and if it's down, buy puts".

But with extreme volatility, sometimes it's even hard to determine those patterns because there isn't a predictable, repeatable, pattern. 

So I started to veer off a little bit... It almost was if I was revenge trading. 

What is revenge trading, why should you avoid it, and how can you?

Let me explain in the episode below. 

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At one point last week in the market, I was down about $70,000. 

But the direction of the market changed, and I was able to quickly buy some calls and I got all of my money back. 

At that moment I thought I was SLICK! I started getting this bravado like the market can't touch me.

I thought I could flip with the market. 

So I started in getting in and out of trades... and I realized:

I was venturing too far out of my trading plan. 

Mistakes start to happen when you get off your mental game. 

That's what happened to me... I was feeling myself and started revenge trading. 

I have rules that we teach inside of Power Trades University, such as a 1:3 risk/reward ratio, open interests... so many factors in order to trade safely. 

Well all of that went out the window all of a sudden because I got too much in my heart with trading and not in my head. 

That can lead down a dark, unproductive path. 

I had to snap out of it. 

Every day last week I was trying to be in and out and trying to make what I lost and then some. 

If you recognize that you are off your mental game, I urge you to snap out of it. 

Get a trading game plan and stick to it. 

My account was swinging up and down thousands. 

I was thinking to myself wow, I could've actually used that money to buy something. 

But there it was gone in the market. 

When it's up and down in your account its just dollar amounts. 

It isn't real until you send it out to change to do something for your life. 

When it's in the account it's not impacting your life yet. 

So I thought to myself why aren't I using this money?

Meaning don't trade your bill money.

And then on top of it, only take trades that you feel really feel good about and that fits your plan. 

Don't "revenge" trade to try and make all of this money so you can pay your bills. 

You need to use money that if you lost, your life would go on. 

But man how sweet that reward is when you do grow it and are able to use it!

So don't start making random decisions that aren't well thought-out. 

I realized my trades were super short-term and that's risky! I normally never do that. I always give myself enough time. 

I value the opportunity to make more money, instead of buying more things. 

But sometimes you do end up losing money, can't buy the things, and all you are left with is a lesson. 

The lesson I learned were a few (even though yes I was able to get my money back):

-Should have had a stop loss
-Should have reduced risk with a spread
-Should have trade my PLAN 

Thankfully I walked away pretty much unscathed. 

And I look back and thank those lessons and also the opportunity to make more money because it's a skill I have acquired. 

The market has been very volatile and if you aren't careful, you may start to lose it mentally and investing is a mental game. 

If that's you, take a step back and re-analyze how you are trading. 

Are you protecting your account? Are you trading your plan?

If you don't have one yet, then you need to get one. 

And remember: Doing nothing is a strategy. 

Meaning not trading is something you can do to protect your account, while still researching and learning how the market works so you are ready. 

I hope this helps! I know it helped me because I needed to reset how I was looking at the market. 

If you are looking to learn how to navigate these volatile waters with some of the strategies that we discussed, I encourage you to join us inside our Power Trades University learning platform and community.