8 Tips for How to Trade in the Zone

Trading Focus

Trading Focus

I am convinced after thousands of trades that success has very little to do with indicators or systems.

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It also has very little to do with how much money you start with in your account.

It all comes down to your ability to stay in the flow with the market. In order to stay in the flow, you have to be in control of your own feelings, thoughts and actions.

In this article, we will cover my tools and techniques for recognizing when I have lost control, work my way back to the center and then stay in the zone.

The Tokyo Stock Exchange Journey

Tokyo Stock Exchange

I am attempting to grow a very modest account trading the Tokyo Stock Exchange over the next 5 years.  I am only 6 months in, so don’t hold your breath too long.


The one thing I see time and time again with my trading, is that it all comes down to control.

Let me be more specific.

The Tokyo Stock Exchange is unlike the US markets in many ways.

There are limit ups on individual stocks.  This means that a stock can only run a certain number of points in a given day, before all trading stops.  You can try to place a limit order, but good look getting that executed as the volume drops off the charts.

The other key difference is that I have very little ability to use margin or short stocks.  This is because I am what they would call a “greedy American” and the margin requirements for foreigners are pretty strict.

This has actually worked to my advantage to ensure I do not blow up the account while I am getting my feet wet.

Now that I have finished my whining rant, at the end of the day, the TSE is a market just like any other market.

Yes, there are different rules and yes the stocks may trade differently.

At the end of the day, whether someone is Japanese, Australian, or American, we are all attempting to turn a profit to improve the way of life for our families.

Shifting Gears Back to Control

I just wanted to provide the context of what and why I am trading, now I want to dig back into the topic of this post, which is trading in the zone.

My youngest son is in pre-school.  Like anything else in life, you learn everything you need to know probably by the age of 3.

One timeless lesson for my youngest, is the concept of self-control.

His teacher preaches this to every student on a daily basis.

Do not hit others. Don’t cry if you need something, collect yourself and use your words.

Many traders, myself included, can use this sort of advice when it comes to placing trades.

Let’s dig into when we find ourselves going off the reservation and how to bring things back to the center.


Losing Control

Before we can discuss keeping things under control, we have to first discuss what happens when you are losing control.

I love to go on runs.  I will have a 3 to 4 week run and then I will have some seismic event which brings my account back to earth.

Unlike so many traders, I will not attribute this zig zag equity curve to the Nikkei – it’s all me!

Let me describe some of the things I experience when I lose control and see if any of these apply to you.

  1. I will start to go way beyond my hours of trading. I want to wrap up no later than 1.5 hours in, but if I find myself trading at 1:30 am, I am chasing money instead of staying in the flow.
  2. I start placing trades super early in the morning before there are clear high and low pivot points.
  3. I start increasing my size. Sometimes I do this in hopes of increasing the size of my winners, often times it’s just me fighting the market, much like a baby trying to beat up water at the beach.
  4. I just feel frustrated, depressed, angry, sad, tired…you kind of get the point. My head is just not in the game.
  5. I contemplate quitting this journey and just going back to what feels comfortable. If you haven’t thought about quitting trading, then you have yet to lose control. Keep reading this article, you will at some point.
  6. I can’t find a winning stock. Everything I touch goes against me or I bail on my trade, right before it goes my way.
  7. I no longer have a system. I am kind of just trading.  Well, it’s not total chaos, but my system, which was once very clear, becomes gray all of a sudden.
  8. I start to lose the conviction in my trades. This anxiety doesn’t even require the stock to go against, me, it can come on right after the order fills.

These are just my top 8 indicators, that you know what is about to get crazy.  You need to dig deep into yourself to identify your own personal triggers.

How to Get Through the Pain

Trading Focus

Some will say stop trading and take a breath. I have probably stated that somewhere on the Tradingsim site at some point.

My humble opinion is of course to practice trading to make sure you adhere to your system.  However, I believe that you should trade through the pain.

This of course means you should reduce your size drastically, but you have to keep going. The key thing is to work through the negative thoughts, the doubts, the worry and just focus on getting back to your center.

This may take a week, or it may take 3 months - it is what it is.

The point is keep your head down and don’t think about anything.

How to Stay In the Zone

This is by far the hardest thing to do and in the spirt of full disclosure, I am going through one of these hyper focused periods, so I wanted to get it out of my head and on the blog.

One to help myself but also to maybe help others.

Now that you have lost control and have traded through the pain, you find yourself in a zone.

I’m talking about 10 or more winning trades in a row.  You accidentally click the keyboard, place an order and the stock somehow still goes in your favor, type run.

Let’s list a few ways to stay dialed-in:

  1. Sell your position as the stock moves in your favor. This of course will limit the maximum amount of money you can make on each trade, but it just gets you in the flow with the market to take whatever she is making available to you in the moment. So, if you have a 500 share position, sell off a hundred shares or so as things go in your favor. Keep repeating this step until you unwind the entire position.
  2. Be patient. Let me repeat this again, be patient.  With the winning streak comes a certain cockiness and just carelessness, that things will forever go in your favor. Once you make this mistake, you will end right back up in the pain cycle.
  3. Have a set limit of how much you can make in a day. For me, it is 1.5% of my starting portfolio value.  If I hit that number after my first trade I’m done for the day.  The only way I will place another trade, is if I am up less than 1.5%. If my second position runs, then I will have a really good day. Regardless, the point is that far too many of us give back our profits as we trade throughout the day.  Look back at your trades and see what percentage up you hit before giving back your money. Whatever that percentage is, respect it and close down shop.  I don’t care if you have only been trading for 5 minutes, remember this is not a 9 to 5.
  4. Limit the number of trades you place per day. I am now limiting myself to 2 trades per day. That’s right, I used a word implying a constraint – limiting. Too many traders feel that the market is this endless sea of money. Well it is to some degree. But, with the endless opportunity also comes the risk of you losing control. Figure out a number or a range of trades (5-7, i.e.) that you are willing to trade and call it a day.  This will make you really focus and be patient as you will not want to blow your trading opportunities on nonsense.
  5. Limit the amount you are willing to lose per day. For me this number is 2% of my total account value. If I lose that amount, it’s time for me to call it a day.  Every time I would go down around 2%, what do you think my mindset was at that point? Well you guessed it, how do I make back the money. This would inevitably lead to me having a blow up day.  From experience, if you have 3 blow up days in a month, you will essentially be wasting your time day trading.
  6. Learn to trade with less money. Whatever you think you can afford to trade with, knock that down by 15% to 30%. This will ensure you stay within your means. If you trade too large, it will impact your ability to trade your system appropriately.
  7. Close the doors of the business at a set time. The market closes every day at a set time, why shouldn’t you? Once you start trading all day with little to no rules, you know where this will lead.
  8. Meditation - If you don’t meditate, you should start.  Your ability to make or lose money in the market all starts in the space between your two ears. For me, meditation feels a little strange.  I have no doubt it works, but it just doesn’t fit me. For me I like to pray before I trade. Most recently, I have been listening to the UK singer Corinne Bailey Rae. She makes the most soothing music and it helps calm me when I see the tape start flashing red. Find your way to clear your head and stay even when trading.

In Summary

I really hope this article helps someone. What I listed in these points again were applicable to me, but you can easily tweak the values or themes to match your trading style.

At the end of the day we are all experiencing the same feelings and emotions due to our human condition.

Feel free to email me at [email protected] to discuss this topic further.

Photo Credit

Trading Focus

Tokyo Stock Exchange

Trading Focus

Al Hill Administrator
Co-Founder Tradingsim
Al Hill is one of the co-founders of Tradingsim. He has over 18 years of day trading experience in both the U.S. and Nikkei markets. On a daily basis Al applies his deep skills in systems integration and design strategy to develop features to help retail traders become profitable. When Al is not working on Tradingsim, he can be found spending time with family and friends.
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