- Defining the zone. The zone is an ideal psychological state where you are doing everything correctly. Centered state of mind, activating positive memories by remembering the sights, sounds and smells of past positive experiences. Allows you to trade in a disciplined way and yet be more open to opportunities. You do more work with less effort. “You start to see things.”
- How to enter the zone. Players who are willing to get in the zone are willing to do the uncomfortable thing. “When I find an easy trade, it is usually wrong.” It requires conviction. Conviction comes from a willingness to trade your ideas and to develop confidence in your ability to assess what moves to make. Confidence to stick with your convictions. “When I think I am right, I will stay there. I don’t care how the stock trades.”
- How to be in the zone. Totally focused. Time stands still. Less resistance. Follow your strategy, trust your plan. “I did the work. If I thought I was right, I didn’t care how they traded. I stayed with them.” Trading with a lack of concern for results. Greater tolerance for pain. Don’t let this tolerance push you out of control. Your risk appetite should be clearly defined. “The zone is not comfortable. It is being a little bit on edge. Trading is a game of uncertainty.”
- How to stay in the zone. “Take a step back and think about what is going on. When I am worrying about my profit and loss, it takes me out of the zone.” Make small successes and build on them.
I find myself in the zone when I am against the Street on a stock and I still know that I am right. I'm calm, knowing I've done my work and my thesis will eventually play out. Especially in my biggest, best short positions, I find myself occasionally in this state.
I've found myself in this same zone on big long trades like TSLA the last couple of years. As the voices of opposition got more shrill, more emotional and less-informed, I knew I was right to be long.
I also recognize when I am not in the zone. When things are out of kilter. When nothing works. 2014 is one of those years for me- I'm making good trades and doing good work, but nothing is really gaining traction. What to do? Just work through it.
(Abstaining from online pornography and masturbation actually helps you stay in the zone physiologically, but that is an entirely different topic. See work by David Deida for more information.)