Traders Union research: One in three traders try to recover their losses
Some 38% of traders opened at least one trade in the past three months primarily to recover previous losses, even when the trade did not meet their usual strategy criteria. This is according to new research by Traders Union.
In the study “Why Is It Hard to Stop Trading After Losses?”, Traders Union analysts also found that 31% of traders prefer to take a break after a losing trade, while 24% continue trading according to their existing strategy. Meanwhile, 18% immediately look for another opportunity to recover their losses.
This behavior is known as revenge trading — an attempt to recover losses driven by emotions. Over the past three months, 17% of respondents reported making such a trade once, 14% did so two or three times, and another 7% admitted doing so four or more times.
Traders take greater risks after losses
The study found that 29% of traders increase their position sizes after two or more consecutive losing trades. Another 27% begin trading more frequently after three consecutive losses.
However, not all market participants try to recover losses by taking additional risks. Around 26% reduce their position sizes after a losing streak, while 24% temporarily stop trading.
Among those who continue trading after losses, 39% say their main motivation is finding new opportunities that meet their strategy criteria. At the same time, 28% primarily want to recover lost money, while another 15% want to avoid ending the trading day with a loss.
One in three traders violate their own limits
Even predefined restrictions do not always help traders control their risks. Among survey participants with daily loss limits, 34% admitted that they had continued trading after reaching their limit at least once in the past three months.
For 32% of traders, reaching their daily loss limit is the main reason to stop trading after a losing streak. Another 23% stop because of emotional stress, while 17% do so because they lose confidence in their strategy.
The researchers also identified differences across markets. Revenge trading was most common among binary options traders (47%). The figure stood at 40% among cryptocurrency traders, 35% among Forex traders, and 30% among CFD traders.
According to Traders Union analysts, the desire to recover financial losses quickly can push traders toward riskier decisions. However, continuing to trade after a loss does not necessarily indicate emotional decision-making if the next trade follows a predefined strategy.
Previously, Traders Union research found that trading signals influence the decisions of 47% of traders.
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