Revenge Trading - What is it?
Revenge trading is when you get into an emotional tussle with the market and become overly aggressive with trading. You've suffered some losses and you are understandably upset about it, so you set out to get revenge on Mr. Market, the one who took your money away.
Revenge Trading Can Hurt
As hard as it can be to fight the emotional response, traders must refrain from revenge trading. Emotions are a forex traders enemy. The typical revenge trade will be double or triple the size of the previous losing trade. The trader will reason this out as "I can make back what I lost and add a gain to it, and quickly". The only problem with this approach is, if the trader's hasty decision turns out to be wrong, they are going to add a double sized loss to what they already lost. This turns revenge trading into a never ending pit of bigger and bigger trades until a margin call occurs.
There is another way
Although it's not a glamorous choice, it makes much more sense to accept defeat for the moment and admit your mistake. It's always slower climbing back up out of the hole than it is to fall down into it, but the long term rewards are much better.