How to Stop Revenge Trading and Trading On Tilt

Have you ever had the experience of being hijacked by your emotions while trading, to the point where you end your day in a daze wondering who was the stranger who took all those impulsive and reckless trades? If so, you are most definitely not alone. You are likely one of the large percentage of traders who regularly succumbs to impulsivity and is look for a solution to put a stop to revenge trading or trading on tilt.

It’s a common pattern among traders. You start out your trading day with the best of intentions of executing your trading plan to a tee. Somewhere along the line a few things go wrong for you, maybe you take a few losses or you miss an entry, and the anger starts rising in you. This quickly becomes paired with frustration, impatience and suddenly you find yourself ignoring stops, taking every setup that moves or even blowing past your daily loss limit in an effort to end the day green. It’s as if somebody else is in the driver’s seat of your trading.

In a sense, this is exactly what is happening. Although it’s not an outside entity that has wrestled control of your keyboard, but a deeper part of your psyche – your subconscious mind.

DISSOCIATION AS THE ROOT OF REVENGE TRADING

Dissociation is a common coping mechanism that humans resort to under pressure. It’s a protection mechanism that is triggered by the subconscious mind so that we don’t have to “feel” the discomfort of the challenging situation. It allows us to detach from the emotions and consequences of what is happening in order to be able to better cope with it. This could be useful in certain circumstances – while trying to logically plan an escape route out of a burning building for example –  but it doesn’t serve traders in the heat of the market when staying in control of your actions is paramount.

Under the stress of repeated losses or facing the uncertainty in the market, the subconscious mind triggers the instruction to stop “feeling” the discomfort. This sense of detachment is what enables traders to start trading as if they were using monopoly money and to easily break all their carefully curated trading rules. It’s only when the pressure is over – the end of the trading day or when your broker locks you out of your account – when the sense of reality seeps back in and you realise the damage that has been done.

Often, we learn this coping mechanism as children and we continue applying it into adulthood across different areas of our lives. If you are somebody who regularly engages in revenge trading or trading on tilt; it’s likely that you will be using this coping mechanism in other areas of your life. For example, after an argument in a relationship maybe you switch off, detach and go and binge on Netflix so that you don’t actually have to feel the emotions coming up for you. 

HOW TO OVERCOME DISSOCIATION

Dissociation is effectively a form of “numbing out”; allowing you to divorce from the consequences of your actions so that you only feel them when you are well out of the market. 

“The key to overcoming dissociation, is to focus on staying utterly present while trading.”

As the pressure rises; you’ve had some losses or things are not going your way, the aim is to stay fully present, fully conscious and rooted in your body. This reduces the likelihood of you going into autopilot mode where you can easily break your rules or trade on tilt. If your aim is to permanently end revenge trading, respect your daily loss limit and exit at your stops, then staying present is the key to doing this. Let’s talk about HOW you can put this into practice:

5 TIPS TO STOP REVENGE TRADING AND TRADING ON TILT

TIP #1 NAME YOUR EMOTIONS

This may sound simplistic but there is research to show that if you clearly identify what challenging emotions you are feeling by labelling them, you can actually reduce their impact. By consciously naming your emotions as you sit in the market and you feel the urge to revenge trade, stay in a trade too long – or however dissociation shows up for you – you can stay in control of your actions. 

The most common emotions associated with revenge trading and going on tilt are those like anger, rage, frustration, fear and worry. Saying out loud the emotion that you are feeling is enough to disrupt the automatic pathway between the emotion arising and you engaging in the action that will sabotage your trading. If you get into the habit of consistently using this simple technique, you start to train yourself not to divorce from the reality of the situation or the consequences of your actions. In this way you can train yourself to stay present when the pressure comes on.

TIP #2 JOURNAL AFTER EVERY TRADE

Writing down two key points of information after every trade is a great way of remaining in the driver’s seat of your trading. For this technique to be effective it’s important to do this after every trade – win or lose – and to record this data in a spreadsheet where you can review it in the future.

The first piece of information to note down is the emotion that you were feeling while in the trade. This keeps you connected and present (as discussed in tip #1) and it also gives you really useful information that helps you to increase your self-awareness. If you consistently keep track of these emotions, over time you will be able to see the patterns that emerge of the emotions that regularly show up for you in the market and how they influence your actions. That is the key information that shows you how you operate under stress. 

The second piece of information to note down is whether you executed your trading plan as you had intended to or not. On the occasions where you didn’t stick to your plan, write down the action that you took that demonstrates you deviating from your plan (e.g. “I stayed in the losing trade too long” or “I went over my daily loss limit”). This keeps you conscious, present and connected with the consequences of your actions and it also helps you to improve your self-awareness and understanding of the patterns of your behaviour.

TIP #3 USE PROGRESSIVE MUSCLE RELAXATION (PMR)

Progressive Muscle Relaxation is a specific type of meditation technique that helps to reduce physiological symptoms of stress in the body and to calm the mind. PMR trains you to use a combination of breathwork and tensing and relaxing muscles to cue your mind and body to relax on-demand. This is such a powerful technique that I have included a guided audio PMR meditation in my Go Deep to Level Up Your Trading™ course. 

PMR is different to other types of meditation techniques because it involves actively tensing and relaxing your muscles as part of the exercise and it can also be implemented in short-form (a 3-5 second exercise) while trading. This makes it a really effective technique for staying physically connected to your body and coping with increased levels of pressure in the market. 

Because trading on tilt and revenge trading generally only happen when someone is feeling under pressure, using PMR can prevent your subconscious mind from seeing the need to activate the stress-response in the first place.

When the PMR technique is condensed down into a short-form exercise, it can be as simple as squeezing your left fist tightly, holding for a few seconds and then releasing the tension fully while taking two slow, deep breaths. Then repeating this sequence with your right fist.

TIP #4 HOLD YOURSELF ACCOUNTABLE

When it comes to staying in control of your mind and actions while trading, accountability is key. But you need to hold yourself accountable to the right type of metrics so that you don’t exacerbate the pressure you feel under which, in turn, increases the likelihood of going on tilt. 

Instead of focusing on the P&L as your measure of success, set performance goals that hold you accountable to the execution of your trading plan. Rather than setting a profit goal for the day (which is never fully within your control when you are at the mercy of the market), set a goal like “90% or more of all trades taken met my A+ setup criteria” or “On 90% or more of trades I exited according to my plan”.

Write these goals down during your pre-market prep and then record your performance on the same sheet at the end of the trading day. Tracking your performance against these metrics over time will help you to shift your focus away from the P&L and help you to redefine success in trading as the successful execution of your plan.

TIP #5 USE A DECISION-TREE

A Decision-Tree is a simple plan of action that you create, away from your trading desk, to prepare for any potential scenarios which may derail your trading. The beauty of this technique is that you create the plan when you are feeling emotionally composed and in a very rational and logical frame of mind. Then, when you are in the heat of the market and your emotions are starting to hijack your actions, you don’t need to waste any mental energy deciding how to course-correct because you already have your action plan. 

To create your decision-tree, decide on a trigger event that will trigger the implementation of your plan. This will usually be the emotion that you normally feel before you go on tilt or revenge trade. Rate the emotion on a scale out of ten and decide on the number which will activate the decision-tree (e.g. feeling anger to a strength of 6 or higher out of ten will activate the decision-tree). Or your trigger may be some scenario like two losing trades in a row. 

Next, plan out the sequence of actions that you will take if this occurs in order to regain control of your emotions and stay fully present and conscious. This could be something like; (1) I step away from my computer and do 3 minutes of breathing exercises, (2) I re-rate my anger levels, (3) if my anger has reduced to 5 out of ten or below I continue trading, (4) If my anger levels are still 6 out of 10 or above I stop trading for the day. By using your decision-tree you can disrupt the tendency to automatically go on tilt as early as possible in the pathway, saving you both financial and emotional capital.

SELF-COMPASSION AND PERSISTENCE

Overcoming revenge trading and trading on tilt requires persistence and a lot of self-compassion. If dissociation has been a coping mechanism that you have been using since childhood, then you are not just trying to change this pattern of behaviour in your trading but also fundamentally in how you as a person responds to stress. Happily, these 5 techniques outlined can be applied both in your trading and in your wider life to optimise your resilience to pressure. 

If you liked these tips and are looking for more in-depth trading psychology insights to improve your trading, check out my FREE on-demand Masterclass: