Tell me what you do in this situation. You just got done scanning about 100 charts. Some look good, some look bad, but nothing jumps out at you. Do you still trade that day?
Or, this: You wake up midweek. It's a glorious day. The beach beckons, the lounge chair calls -- all you want to do is read a pulpy novel, down a few beers and muster enough energy to take a 3 p.m. nap. Do you still trade that day?
Or, finally, this: Your trading has been dull of late. At best, you're batting 50%. At worst, you know you're lying to yourself: You've actually been losing a lot of money with terrible trades. You're starting to hate looking at charts, and doing that idiotic technical analysis. But since you've left your cushy exec job at
and told your spouse you could make a good buck trading, you feel obligated to keep plugging away and get out of the red. Do you still trade that day?
Well, if you're like me, the answer has always been yes, yes, yes. But, the more I trade, the more I think it should be no, no, no. The reason? This whole notion of being in the "zone." Read on and see if you agree.
Those who have been longtime readers have probably noticed me morph from being 100% purely mechanical, to some sort of mechanical/intuitive hybrid. More and more, I've touched on the topics of intuition, experience, emotion and other "non-method" aspects of trading throughout my columns.
But the truth is, there's always been an element of intuition or "feel" in my form of TA. I mean, really, is a breakout in my eyes always a breakout in your eyes? Of course not. Do you and I and hundreds of other traders always see congestion in the same exact way? Again, no.
The reason is that chart reading requires some form of artistic interpretation and overall chart "gestalt" if you will. In short, I firmly believe you have to be in sync with the charts that day, almost to the point of being able to visualize what's going to happen next.
And when I can visualize what's going to happen next, when I can almost see the next few bars on the chart, that's when I do my best trading.
Sometimes I'm so excited about taking the day's trades, I can't wait until the opening bell at 9:30. I don't think they're going to be winning trades. I
they're going to be winning trades.
It's this same "zone" that athletes get into that I also feel applies to traders. My friend, Lorne Rubenstein (who, by the way, is without equal in the field of golf writing), wrote this about golfer
being in the zone:
He felt connected, via the shaft of the club, to the club head, and through the contact he could conjure so readily. In some way, the club swung him. Miller went along for the ride. It was as if he could stretch himself out all along the fairway and touch the pin. Every golf swing felt slow to him; he felt that he had so much time to complete his swing. A new game -- the game we all seek -- burst through his normal patterns, and he played by sensation, and sensation alone.
Links: An Exploration into the Mind, Heart, and Soul of Golf
, maybe the best book on golf ever written. Period.)
Yes, that's it, isn't it? Even if you've traded for a short time, you might have experienced those same sensations. The trade was so easy. You felt connected to the charts. It worked out perfectly. My God, you were just going along for the ride. If only they were all like that.
And if you've traded for a while, years and years perhaps, maybe you've been blessed with more than fleeting sensations. There have been times when I knew almost every trade I made would be a winner. I didn't think they would be winners, I knew it. And, it's those times my win rate has been nearly 90%. I felt bulletproof. And I was.
But, you know what happens. Those moments don't last. Rubenstein on Miller again:
His play then tapered off, and he rarely played that kind of golf again. The zone he inhabited in the mid-1970s is a foreign county that he later revisited for a few shots at a time, perhaps a round here and there. He wanted the experience again, but it's elusive.
And there, of course, is the crux. You can get in the zone. You just can't stay in the zone. Not for long, anyway. Unfortunately, your ego never acknowledges that you left. Even if it's only temporary.
No, you're like one of those sad prize fighters -- detached retina and all -- who keeps coming back for more punishment. "Me, nah, I'm just going through a dry spell. I'll get it back. In fact, I'm so sure of myself, I'll start doubling down, and end up making back all I lost and more!"
And, it's about that time you get your head handed to you.
So, what's a trader to do? It seems many of us fall into one of two camps. We're either in the zone and feeling that no evil can undo us. Or we're out of the zone, and trying desperately to get back in.
I opened this column with the "no-zone" camp, because sadly, that's where many of us find ourselves more often than we'd like.
However, being in the zone also offers its share of pitfalls, is potentially more dangerous and has wrecked more traders than all other trading maladies combined.
I'm out of column space now. Or, perhaps just out of the "writing zone" for today. Monday, though, more thoughts on this zone stuff. How to get in. How to stay in. And what to do and not to do once you're there.
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at