Find the zone

by Brett Steenbarger, PhD

A number of recent books have emphasized trading as a performance activity, in which mental state is a key element in success or failure. So prevalent is this view that two separate books with the same title—Trading in the Zone—have appeared in the last two years. What is this “zone” and how can traders reach it with consistency? In this article, I will review ideas about the zone from a variety of sources, including new research in cognitive neuroscience, and spell out the implications for futures and options traders looking to improve their mindsets—and their profits.

Understanding the Zone

The idea of a performance-enhancing zone originated neither in athletics or trading, but in the philosophy of Zen Buddhism. In the 1930s, Eugen Herrigel traveled to Japan to learn Zen through the practice of archery. Nearly two decades later, his book, Zen in the Art of Archery, popularized the notion of achieving excellence through mental discipline. His book was the inspiration for the popular novel Zen and the Art of Motorcycle Maintenance written by Robert Pirsig. Interwoven in Pirsig’s story of a father and son rediscovering each other on a motorcycle journey is a serious exploration of the experience of “quality”. Traveling on a cycle, Pirsig explains, possesses a different “quality” from driving a car. In the latter, you are always watching reality through a frame, shut inside a compartment. On a cycle, he writes, you are “in the scene, not just watching it anymore, and the sense of presence is overwhelming.” This fusion of actor and act, performer and performance, is experienced as “the zone”.

Crucial to the philosophy of Zen—and to the accounts of Herrigel and Pirsig—is the idea that our normal state of consciousness ruins the quality of the Zen experience. As soon as we consciously think about our performance, we are no longer one with it. Trying harder at a task only compounds this separation. The discipline of the Zen archer can be found in the performer’s ability to still the mind, remove mental interference, and allow instinctively honed skills to manifest themselves naturally.

In their books Trading in the Zone, authors Mark Douglas and Ari Kiev emphasize the importance of focus and concentration in reaching a state where trading flows without seeming effort. Both authors view the zone as an outgrowth of trading discipline and a positive mindset. Once the trader lapses into patterns of fear, greed, and frustration, the zone is lost and instincts born of long hours of observing market patterns cannot emerge. For the trader, as for the Zen archer, turning off the mind is a crucial element in success. But how valid is this notion of the zone? Do elite performers in archery, trading, and other fields of endeavor truly find their success in Pirsig’s state of “quality”? This is where research provides surprising answers.

Creativity and the Zone

Abraham Maslow was one of the first psychologists to study healthy, high-functioning individuals rather than mentally ill ones. His investigation of “self-actualizing” people—those who were unusually creative, productive, happy, and fulfilled—led to several important discoveries. Foremost among these, he found that self-actualizing people report a significantly greater number of “peak experiences” than the average individual. These peak experiences, he explained, have an almost mystical quality, in which the person feels suddenly at peace, at one with the universe. Invariably these experiences arrive during moments when the self-actualizing person is immersed in an activity of personal significance. Interestingly, they emerge naturally and spontaneously, not by conscious design.

Could Maslow’s “peak experiences” refer to the same mind state noted by Herrigel in Zen archery, by Pirsig in his exploration of “quality”, and by traders who have experienced “the zone”? Research by University of Chicago psychologist Mihaly Csikszentmihalyi would answer in the affirmative. Studying unusually creative, successful individuals across a variety of disciplines, Csikszentmihalyi found that their work activity is accompanied by a state of “flow”. This flow state is experienced as inherently enjoyable, in which workers are so immersed in their tasks that time seems to melt away. They lose awareness of themselves and their settings, becoming one with their labors.

In his book Creativity: Flow and the Psychology of Discovery of Invention, Csikszentmihalyi identified nine characteristics of work activities that yield the flow experience (See Figure One). He found that challenging tasks with clear goals and immediate feedback provide the greatest intrinsic pleasure. Summarizing these studies, Csikszentmihalyi writes, “Every person we interviewed said that it was equally true that they had worked every minute of their careers, and that they had never worked a day in all their lives. They experienced even the most focused immersion in extremely difficult tasks as a lark, an exhilarating and playful adventure.” He describes performers in the zone as “programmed for creativity” because their pleasure-pain mechanism leads them to seek ever-greater productive challenges. (See Figure One at the end of this article for a list of characteristics associated with “the zone”).

What makes the creative, successful, self-actualizing person unique, then, is not just the presence of “peak experiences”, “flow”, or “the zone”, but the ability to access and sustain this state with regularity. This is only possible, Csikszentmihalyi asserts, when people intrinsically love what they are doing. The trader who is primarily motivated by factors extrinsic to the markets themselves—by a need to prove himself, a desire to avoid failure, or urges for fame or fortune—is less likely to find the zone than the trader who finds the markets fascinating in their own right. From the Maslow-Csikszentmihalyi perspective, it is the trader who is “programmed for creativity”—who finds intrinsic enjoyment in the rigors of studying and trading market patterns—that is most likely to develop unique, winning trading strategies.

Exemplary Achievement and the Zone

Persistence of effort fueled by intrinsic love for one’s work seems to be a formula for success across a variety of disciplines, not just trading. Studies supporting this conclusion date back to Francis Galton’s 1869 work on Hereditary Genius. Investigating eminent creators, Galton found that these high-functioning individuals were capable of performing large amounts of highly laborious work, as if they were “urged by an inherent stimulus”. This “laboring instinct”, Galton believed, was a major factor in determining success or failure.

Subsequent research has confirmed Galton’s early conclusions. Psychologist Dean Keith Simonton of the University of California at Davis, in his book Greatness: Who Makes History and Why, explains of highly productive creators, “These individuals are driven by huge motivational forces that far eclipse the impetus behind less accomplished colleagues…Geniuses cannot spend so many hours without an inherent passion for what they do”. The reason the successful people are successful, Simonton found, is that they produce more than their colleagues: more works of art, more scientific experiments, more political initiatives. Because of this productivity, they are more likely than the average person to hit the jackpot and stumble across a truly meaningful contribution.

These findings have significant implications for traders of futures and options. A trader’s productivity might be measured, not just by his or her equity curve, but in the number of unique and viable trading strategies that can be generated. The trader motivated by an intrinsic fascination with the markets is constantly working on the markets, seeking a tradable edge. A developer of 100 mechanical systems, on average, is more likely to come up with a robust trading method than a trader tinkering with the canned “systems” that accompany many charting software programs. Similarly, the discretionary trader who has observed and paper traded thousands of days of market action is more likely to internalize tradable patterns than the part-time trader. The zone is important, not just because it blocks negative emotions from trading, but because it provides the motivational fuel for achieving market mastery.

The hypothesis worthy of consideration, then, is that the factors underlying trading success are similar to those underlying success in other fields of endeavor. The successful trader, like the scientific genius or great artist, attains a state in which effortful activity is experienced as inherently pleasurable. This state of flow—what traders know as the zone—blurs the distinction between work and play, fueling an extraordinary level of creative effort.