Glossary · R
What is Revenge trading?
Trading to "win back" losses, usually with larger size, looser criteria and no plan. Daily loss limits exist largely to prevent it.
In context
Losses tend to come in clusters: some days the market does not behave the way your hypotheses assume, and some days your own state is poor. Decisions right after a loss are, on average, worse; the urge to "win it back" brings larger size, looser criteria and trades outside the plan. This is revenge trading. A daily limit stops it and puts a ceiling on your worst day.
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