Not Kungfu Film, No Revenge Forex Trading
Have you ever watched an ancient Kung Fu movie? Usually the story begins with a person’s death; teacher, brother, sister, or maybe the main character’s wife. The death was caused by murder by another character who of course was an antagonist, usually with a thick mustache and a fierce face. Sometimes bearded. The background of the story is usually in the Yuan, Ching or Ming dynasties. (I don’t know which time is right, what is clear is that people don’t know forex trading yet. 🙂)
Long story short, the death caused by the murder grew a resentment in the heart of the warrior who became the main character of the story. It is preceded by a shout: “I will avenge you, Teacher / Brother / Sister / My Wife!” The warrior wandered with a fiery grudge in the heart. Then it can be guessed: usually the warrior managed to find the killer and managed to win a fierce battle which led to the death of the killer. The warrior was satisfied that he could kill the evil character. Usually so.
This “tradition” of revenge – unfortunately – there is also in the world of forex trading . A trader tends to feel “revenge” every time the forex strategy that he has cannot run well, in other words: loss. In forex trading , traditions like this are often referred to as “revenge trading”, aka “revenge trading”.
However, in contrast to kung fu movie stories, revenge stories in forex trading often end with – to sound creepy – “the death of the main character”. Like most action films starring Andy Lau, where the protagonist often dies.
What is actually “revenge trading”?
It is humane when a trader feels sad or at least disappointed when the market senselessly deprives you of money. In such situations, it is very likely that a trader will “burn” emotions and immediately want to avenge defeat.
Revenge trading is actually not a forex trading strategy. Trading revenge is when you become very emotional when the market does not move according to your wishes and you become very aggressive in making transactions. The decision you take is no longer based on careful consideration but rather. You tend to forget or even ignore the rules that apply to trading.
It can be very painful
Emotion is the main enemy of traders. Vengeful traders will double their transaction volume by two or even three times the volume (which has been set in the trading plan ).
Their rationale is simple: “I will be able to quickly cover the previous losses, even added to profits.” But unfortunately this kind of thinking is wrong!
Why? Because if it turns out the price does not move in accordance with the wishes, they will easily do the same thing!
Think about it: for example, you open a Buy transaction of 1 lot, then the price drops as far as 300 pips. With the rationale as above, you will easily open 2 lots of Buy positions again. If then the price drops again 300 pips, with that wrong thought you will emotionally open 4 (four) longer positions!
Yes, if the price bounces 300 pips, you will get a profit. The problem is, are you ready if the price turns down again … infinitely? Even if one day you will “win”, it’s pure because you do ” gambling” . You just throw yourself at an immeasurable risk.
Stick to the plan!
Maybe the first few transactions that you make produce enough profit to make you smile broadly, but you do not realize that it could be someday your smile will be removed by several losses. Finally, several times that success makes you angry and thinks, “I will not be defeated by the market.” In the midst of fear of loss, you will become arrogant and multiply the volume of your transactions.
Or, it could be that you are deliberately placing a lot too large because you don’t have a trading plan before. For this reason, make a trading plan, which also regulates how much risk you are prepared to face. If so, don’t forget to always run the trading plan , huh?
Ready to lose = ready to win
Like the slogan in the campaign period, huh? 🙂
In trading, the slogan is not just lip decoration. You must be really ready to implement it.
Before making a transaction, try to assume that each transaction is basically ready to lose. That way you will prepare how much loss you are ready to bear. If you really lose, you are ready to receive the losses that you experience only a small portion of your capital (usually no more than the range of 2-5%).
You will only be prepared to accept losses if you have really determined how much loss you will suffer. That means, you will still be able to continue your forex strategy freely if losses occur.
More importantly, your personal life will not be disturbed even if you have just lost. You can still pay bills, eat well, still be able to buy tickets for holidays. Anyway, losses in trading do not change your lifestyle at all.Therefore you must – must! – limit your losses.
You must be able to forget the past defeat. All you need to remember is what mistakes have been made that lead to losses. Don’t let your new losses affect your trading decisions.
This is what differentiates champions from losers. Not just a forex trading strategy, but the ability to keep thinking calmly and objectively without being burdened by past events.
If you already feel upset after experiencing a loss , try to take time to get away from the market, at least 24 hours, until your frustration is completely gone. Thus, you will come back fresh and the decisions you make based on your forex strategy will be more objective.
Revenge gives birth to a new grudge
The sentence above also actually quite often appears in the “old school” Kung Fu dialogue. The sentence is usually spoken by an old warrior, tends to act like a recluse.
In trading too. Imagine if after taking action with the intention of “revenge”, the losses you suffered would be even greater. Of course this will give birth to a new grudge.
There are other, more elegant ways to avenge your defeat: trade as usual. Run your forex strategy properly and correctly. No emotion, no revenge. Don’t take trading decisions when your heart is emotional. Wait until it subsides, then step again.
Good luck, Swordsman!