“I lost three trades in a row yesterday, but today I’ll make it up!”
The moment this thought crosses your mind, you have already started down the same path as 90% of the people who fail at prop firms.
The most common reason for failing at prop firms is not that “the strategy was bad” or that “the risk management was too lenient.” It is that “the actions taken after a loss were wrong”—that is the truth.
In fact, the difference between people who pass prop firm challenges and those who don’t lies not in their trading skills, but in their mental management. Even if you have an excellent strategy, if you lose your cool the day after a loss, everything will be ruined.
This article will provide a thorough explanation of the “mental management skills” that are essential for passing prop firm challenges, starting with Fintokei. We’ll cover the 5 routines to do the day after a loss, a pre-trade mental checklist, and the pro mindset of “loss cutting = correct judgment”—mastering these will allow you to become a trader who is not swayed by emotions.
- The psychology of revenge trading—why do you want to make up for a loss?
- 5 routines to do the day after a loss—the specific action steps
- Pre-trade mental checklist—5 self-assessment items
- The pro mindset of “loss cutting = insurance premium”
- Lot size adjustment rule during losing streaks—using a system to control emotions
📺 Watch the content of this article in a video
[YouTube video embed: Prop Firm Textbook Chapter 10]
What is Revenge Trading? The Most Dangerous Psychological Trap in Prop Firms
The #1 reason for failing at prop firms is revenge trading.
Revenge trading means entering a trade without being calm, in an attempt to recoup a loss. Furthermore, increasing the lot size to recover the losses quickly leads to exponential growth of the damage.
Shincho-kun
Teacher… I had 3 losses in a row yesterday, and tried to make up for it, resulting in 2 more losses. I lost 7% of my account balance in 5 consecutive losses…
Kaitai Sensei
That’s precisely revenge trading. It’s not that the strategy was bad or the risk management was too lenient. It’s just that the “actions taken after a loss” were wrong.
The Neuroscientific Mechanism Behind Revenge Trading
Why do people want to make up for a loss? This can be explained by neuroscience.
The human brain has a characteristic called the “loss aversion bias”. According to the research of behavioral economist Daniel Kahneman, the “pain of losing” is about twice as strong as the “joy of gaining” the same amount.
- Gaining 10,000 yen → Pleasure level “5”
- Losing 10,000 yen → Pain level “10” (2x stronger!)
→ Humans have an abnormally strong desire to “make up for a loss”
The Mechanism of Revenge Trading (5 Steps)
Revenge trading occurs through the following steps:
- STEP 1: Lose 30,000 yen
- STEP 2: The brain screams “Ouch! Recover it!”
- STEP 3: Enter a trade without keeping cool
- STEP 4: Increase the lot size (to recover quickly)
- STEP 5: Lose more → Back to STEP 2 (infinite loop)
Worst-Case Scenario in Prop Firms
At Fintokei, the maximum daily loss limit is 5%.
If you fall into revenge trading, you could face the worst-case scenario of being disqualified in just 2 trades:
- 1st loss: -2% (within the limit)
- 1st revenge trade: -3% (result of increasing the lot)
- Total -5% → Exceed the daily loss limit! Disqualified!
You could be disqualified in just 2 trades
Shincho-kun
Ah… I was exactly in that pattern… 5% in just 2 trades, that’s terrifying!
Kaitai Sensei
Don’t worry, this is a phenomenon that can happen to anyone, due to the structure of the human brain. Even pros have experienced it. The important thing is to realize that you are in that state.
5 Routines to Do the Day After a Loss【The Key to Passing Prop Firms】
Here comes the crux of today’s lesson. I will explain in detail the 5 routines you should practice the day after a loss.
The order is important. Be sure to do them in order from 1 to 5.
STEP 1: Don’t Look at the Charts (Morning to Noon)
Purpose: To cool down the brain
The most important thing on the morning after a loss is not to look at the charts. As the memory of the loss is still fresh, the loss aversion bias is strong, making it impossible to make calm judgments.
- Take a walk or exercise (to improve blood flow and refresh the brain)
- Read a book (one unrelated to trading is best)
- Enjoy a hobby
- Converse with family or friends
⚠️ Close the MT4/MT5 app on your smartphone!
Shincho-kun
Huh, don’t look at the charts? Does that mean I don’t have to trade?
Kaitai Sensei
“A day without trading” is the most important day, you know. Think about it, which do you think has a higher probability – trading right after a loss and losing even more, or taking a day off and then trading and winning?
STEP 2: Write a Trade Journal (Noon to Evening)
Purpose: To separate emotions and facts
Once you’ve calmed down, reflect on your trades from yesterday. Writing a trade journal can transform emotional memories into objective facts.
- What time, what currency pair, and why you entered
- Whether the stop loss was appropriate
- What was your emotional state (anxious? fearful? overconfident?)
- Whether you would trade the same scenario again
Just writing down the details can separate “emotions” and “facts.” Many losing trades can be traced back to wondering, “Why did I enter there?”
STEP 3: Check for Rule Violations
Purpose: To distinguish between “proper losses” and “incorrect losses”
Points to check:
- Did you follow the risk management rule (1-1.5%)?
- Did you violate any prohibited actions (covered in Chapter 5)?
- Was the stop loss as planned?
Losses while following the rules → Normal. Don’t worry about it.
Even pros have a 55% win rate, so they lose 45 out of 100 times. A loss in line with the rules is a “success.”
STEP 4: Plan the Next Trade (Day After Tomorrow)
Purpose: To create a “go for the next win” mindset, not a “make up for the loss” mindset
Instead of trading the next day, plan your trades for the day after tomorrow.
- Decide in advance whether to trade or not
- Losing streak rule: Reduce the lot size by 50%
- Tell yourself “Go for the next win,” not “Make up for the loss”
Trading without a plan = Gambling
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