Today's Quote: “The nicest thing about standards is that there are so many of them to choose from." Ken Olsen.

The good news is that there are only two times that a trader is likely to change their standards regarding their requirements to enter a trade. The bad news is that those two times are first, whenever the trader has several successful trades in a row; and second, whenever the trader has several unsuccessful trades in a row. It may sound a little humorous but most traders know this to be true.

Having a plan and the discipline to hold to that plan are key to a trader’s success. Most traders will often find a period of time where things are going smooth, and they follow their plan with minimal problems. However, it is almost a certainty that at some point in the future, the trader will deviate from their plan, and ‘lower their standards’ regarding what an acceptable trade is.

Why does this happen so often? If happens often because the emotions that cause this can come into play when a trader is unsuccessful, or when they are successful. How can that be? It is human nature. When a trader has a very good morning, better than he or she hoped for, that trader is likely to feel the money ‘burning a hole in his/her pocket’ and take new trades that they would normally never take. They feel ‘invincible. “I’m up on the day, let’s see if I can build on that”. Unfortunately that is gambler talk. The next trade needs to be evaluated on its own merits. Taking a lesser quality trade just to trade is the mark of a novice. Have you ever had a good morning, only to give it all back the rest of the day? How does that happen?

What happens with a trader on a losing streak? The desire to get back to even becomes overwhelming. It needs to happen, and needs to happen now. They will often trade greater share size, and do more trades to get ‘back’ as quickly as possible. This is throwing all standards out the door, just to feed the emotion that does not like to be a ‘loser’, or to be down at any moment. Again, the market does not ‘owe’ any trader. Low quality trades will give poor results no matter how bad the trader needs a winner.