Thursday, 23 August 2007

Having a plan

Did you ever play table tennis, or ping pong as we called it, when you were little? Can you remember the feeling of pure satisfaction when the ball would float up to just the right spot and you smashed it back, bouncing it off your unprepared opponents head? It felt pretty good.

Now, the ping pong table is about 9ft long and good players can get that ball moving at around 100 miles per hour. To hit that little ball, taking spin, bounce and a whole load of other variables into account seems like an impossible task. How to do you calculate the trajectory, taking air resistance into account, adjusting for spin, assuming a return velocity of 80 miles per hour plus or minus 20? The answer is you don't. You don't have time to calculate, to cogitate and plan at the time, you just act and react.

Now, what makes a good player and what makes a bad player? Well, the good player has learnt to play the game, either by playing lots of different people, taking the lessons when they lost and any coaching that they could get. The first time they played, the ball probably bounced off their heads a few times or they just missed the table completely. With some determination, a willingness to make mistakes and learn from them and lots of practice they managed to learn to play the game. If you asked any of them to describe their best ever game, chances are it would be a time when they just "got into the zone", they didn't think about it, they just played. Can you remember a time, when you were "in the zone"? May be during a sporting event or at work or something, where you just acted without thinking about it and everything just flowed?

When you're "in the zone" your conscious mind steps out the way and your non-conscious mind does what it does best, react. When we are trading a fast moving market, e.g. a horse race getting close to the off, if we want to get in quickly on a trend we don't have time to think every move through, we have to act. This means trusting our experience, that is, trusting our non-conscious mind, or gut feel. This can be hard and by second guessing ourselves and overly thinking, we can stay out of the zone and miss the majority of a price move or not get out in time. So, how do we get into the zone? Well, first you need to have done the ground work and took the knocks, learning how to trade and follow the market. Next you need to be able to let go and trust what you've learnt. The final and most important step is that you have to go in with a plan. You don't have time to plan during the session, as things can happen too fast, all your planning needs to be done up-front first, so you can just act. You need to know your rules. When do you get into a trade, when do you get out, what do you do if the market moves against you and when. The more specific the better, the faster you can act and the less you have to think and pull yourself out of the zone.

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