Revenge trading – An emotionally driven behavior where a trader attempts to immediately recoup losses with reckless new trades. For example, after a big loss a trader might enter an unrelated position “to get even,” usually violating their strategy. In algorithmic trading, programming a bot to take an immediate opposite trade after a loss would simulate revenge trading – a highly risky behavior. Revenge trading is defined as trading to “recover from a previous loss,” often doubling position size impulsively. It stems from anger or frustration, not analysis. Proper risk management forbids this: bots should never bypass loss protocols due to recent losses. Behavioral experts warn that revenge trading is “dangerous and irrational”. Robots avoid it by simply never acting on impulse but only on objective signals.

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