Movie Making Manual/Directing Actors
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Clint Eastwood never shouts "action!", as he thinks it shocks actors and disturbs their concentration. Instead, he waits until the camera is rolling, and then says, "when you're ready..."
If you have done the casting correctly and your actor has the ability - let them express it. An actor will respond far better if they are given a degree of freedom to bring their creativity to the process. A good director will encourage this without, however, letting it go too far. The challenge here is to find the balance between allowing the actor to express themselves and serving the scene. The scene is part of a greater whole and their performance should be in balance with the other elements of the film.
Next to having a great screenplay and a clear vision, casting great actors is the best thing you can do to improve the odds of your film succeeding. Casting good actors is 80% of the directing process because once you have cast actors who understand what they are doing, the director's job is almost done. External reference on Auditioning and Casting actors
Inexperienced actors nearly always err on the side of overacting, putting too much into the role. Your task is often to convince them to be more naturalistic. Be clear and don't baffle them with technical terms. Explain how tight the shot is and their range of movement within the frame and they should be able to gauge how to behave. One very effective way to get truthful acting from inexperienced actors is to let them improvise their own lines around a specifically designed situation. It works! Guaranteed.
Another rule of thumb is to compliment generally, but criticize specifically. For example, telling an actress that you liked how she flipped her hair will cause her to do it again and again in subsequent takes, and it won't look as natural as it did the first time. Just tell her how great she did and hopefully she'll unconsciously continue what she was doing. However, you will want to be precise (but gentle) when pointing out the things you are certain you do not want.
Discourage the invention of backstories. They waste time. An inexperienced actor will either forget them entirely in the heat of the moment, or struggle to rationalise their performance, as they try to give it, by reference to some invented fact that is not in the screenplay, so that the performance cannot flow convincingly. Or, in other words: [s]he WILL overact, whatever you do to prevent it.
These tricks should be a last resort; the best way to work is through honest and open communication. Being sneaky can sometimes lose you the trust of your cast.
There is a great story about an actor who was so nervous he was having trouble remembering his lines and was getting flustered. The director gave him a coin to flip and asked him to keep flipping it throughout the scene. This successfully made the actor less self conscious and the scene flowed after that.
If an actor continually overdoes it, quietly start the camera, keep it rolling and do a "walkthrough" of the scene. Some of the footage might be quite usable.
Another tip: use action words to describe how you want the actor to play the scene. "Play the scene as if you're begging your son to clean his room" is different than "play the scene as if you're threatening your son to clean his room".