Don't pay the price of sloppy trade selection.  It’s only human nature to try to “make right” a “mistake.”  The market does not care whether you are on a winning or losing streak.  It will take advantage of a hurriedly placed trade on which you may not have done your usual due diligence and you will end up losing more money.

Did you recently have a losing trade that upset you? Or, at least, it would have upset you if you let it? Be careful, you may be setting yourself up for making rash trading decisions.

It’s only human nature to try to “make right” a “mistake.” I have put these terms in quotes because they are subjective judgment calls. “Mistakes” are trades that, in hindsight, did not work out. The trading market does not care whether you’re upset with how your trading has been going lately. But it will gladly take your money if you trade recklessly or with desperation.

The market does not care whether you are on a winning streak or losing streak. But it will take advantage of a hurriedly placed trade on which you may not have done your usual due diligence. You should have a well developed procedure for selecting your stock pick or other trading vehicle.

Perhaps you’ve noticed that sometimes you are anxiously looking for a stock pick you can use to “win back” a recent loss. In fact, you may be trying harder than usual to find your next trade. You may even find that you are trying to “force” a trade. This can be very dangerous and could lead to a death spiral of ill conceived trades.

The market is a harsh mistress, and you may become confused because sometimes these revenge trades just happen to work out. Then you come to expect that your forced trades will always work out. But the market is just setting you up for a fall. Sooner or later, you take a revenge trade and then become “married” to having it succeed. You hold on, and hold on, bleeding cash and peace of mind the whole way down.

How do you avoid getting trapped by the “revenge trading” mindset? The first part is to train yourself to be in touch with the emotional experience your trading provides. If you notice yourself getting anxious about putting on another trade, STOP! Call a time out. Catch your breath. DON’T enter into a new trade. Also, be careful about not compromising on your stop losses on existing trades.

The key here is self awareness and discipline. Nobody but you will know if you are contemplating an ill conceived trade. But sooner or later, you will pay the price of sloppy trade selection. There will always be another stock pick, at least until you lose your account in an undisciplined orgy of revenge.

So don’t become a victim of your desire to reverse a losing streak by forcing trades. Just say “no” to revenge trading.