XS Online Trading Courses

When Anger Takes Over: Reckless Buying (Revenge Trading)

In the previous lesson, we saw how fear can lead traders to sell too early or freeze up. This lesson covers the opposite reaction: what happens when traders get angry at their losses and try to fight back.

The reaction of anger is reckless buying, or revenge trading, increasing exposure at bad prices to try to win back losses fast.

Reckless Buying (Revenge Trading)

Revenge trading is when a trader, upset about a recent loss, tries to make it back quickly rather than sticking to a plan.

It's driven by emotion rather than strategy, and it often leads to even bigger losses than the original one.

This reaction tends to show up right after a big drawdown, when the urge to "get even" with the market feels stronger than the urge to stay disciplined.

Unlike panic selling or freezing, it pushes traders to take on more risk, not less, at exactly the moment they can least afford to.

2017: The Bitcoin Bubble (Frenzy)

The 2017 Bitcoin bubble refers to the historic price surge in which the price of Bitcoin, which stood at around $1,000 at the start of 2017, later reached around $20,000 by December 2017.

This is a classic example of reckless buying based on no clear path.

[Source: Moneyweek - “Chart of the week: Bitcoin bubble hisses yet more air” ]

2017: A Timeline of the Bitcoin Frenzy[1] [2]

By early 2018, the bubble had burst. Bitcoin fell roughly 70% within two months of its peak and, by year's end, had lost about 80% of its value.

After the Bubble Burst: A trader K’s Case

A beginner trader, K continued to buy more during the upward trend, adding to his position each time the price reached a new high.

Even when the Bitcoin market crash started in January 2018, K did not sell immediately, instead watched as the value of his assets diminished week after week.

Hard to Accept the Loss for Traders

Even in February, K couldn't accept his losses, so he opened a leveraged position in Bitcoin, believing that "the price must have hit rock bottom and will rebound soon."

However, the price continued to fall, and K's position was forcibly liquidated, resulting in a loss of funds at a much faster rate than the initial decline.

How Revenge Trading Happens

Even after the 2018 crash, many retail investors did not change their trading strategies. Many traders continued to buy on dips, just as they had during the bull market.

It is based on the belief that new asset classes like Bitcoin “should continue to rise in the long term.”

Revenge trading occurs when people try to recoup their losses after a market crash.

While increasing your position might seem like a way to erase losses, trying to recover them during a market crash is a reckless idea.

How to Protect Your Assets when the Crypto Bubbles Burst

When a Bitcoin bubble pops and prices start to plummet, watching your portfolio shrink can be terrifying.

But in moments like these, your main goal should be capital preservation, not chasing your losses. Here are the essential strategies for protecting your investments.

Establish Clear Trading Rules

When the market is declining, any trader can fall into FOMO and lose the ability to make rational decisions. To avoid unnecessary losses from emotional trading, set your rules in advance and commit to disciplined trading.

For example:

Define a maximum daily loss limit, or set a specific price-drop threshold at which you'll stop trading for the day.

Set Stop-Loss Orders

By setting stop-loss orders in advance, your cryptocurrency will be automatically sold once the price reaches a predetermined level.

This lets you limit your risk and keep your losses to a minimum, without having to decide the heat of the moment.

Rely on Reputable Analytical Information

You cannot perform sufficient analysis based solely on exaggerated posts on SNS (X or IG)  or Discord. Instead, look for unbiased, factual data to guide your decisions.

• Trusted Sources: Follow credible, dedicated crypto news and on-chain analytics firms that provide raw data rather than opinions.

• Technical Indicators: Use tools like the RSI or Moving Averages to visually measure whether the market is overheating or reaching an oversold bottom.

Verify Fundamental Factors

When assessing the long-term viability of a project during a downturn, it is also important to check its core fundamentals:

• Development Activity: Check if the developers are actively updating and maintaining the project.

• Partnerships: Confirm the backing of reputable partners or sponsors.

• Community Engagement: Evaluate how active and genuine the community is.

Conclusion

• Revenge trading happens when traders try to win back losses quickly, driven by emotion rather than a plan.

• Set stop-loss orders in advance so trades exit automatically once a preset price is hit.

• Relying on credible data and a project's real fundamentals, rather than social media hype, helps you tell a genuine recovery apart from a crowd still chasing a bubble.