Captain Phillips, SEAL Snipers and Trading

I saw the movie Captain Phillips this weekend with my son. A very intense and well done movie. I don’t think it gives anything away, (but, spoiler alert, if you don’t know how it ends and don’t want to then don’t read this) but at the end of the movie three SEAL snipers dispatch three pirates with precise, simultaneous shots taken while lying on a rolling ship and firing into another rolling ship. Respect.

The part of the movie that focuses on the snipers’ activities is very small. Just a few scenes of them jumping from an aircraft to get to the ship, a few short screen shots of them lying on the ship, and then we see them take their shots and pack their gear as if they are packing their briefcases to head home from another day at the office.

There are no high-fives, no giddiness over eliminating the pirates holding an American hostage, just a business-like approach to doing the job they’ve trained countless hours for.

These guys would make excellent traders! I don’t want to belittle or devalue what the snipers do by the comparison I want to take a few minutes to make, because these guys flat out rock at what they do.

If I were a SEAL sniper I might feel that comparing me to a trader would be a bit of an insult, but it is just the opposite. The learned skills these men bring to their profession are the exact match to many of the skills a good trader should have.

Let’s focus on three things the snipers have that would benefit any trader. First, they have learned skills that make them formidable. Second, they have what appears to be infinite patience as they go about their job. And Third, when the time comes to take the action they have been trained for, they execute their planned task both deliberately and without hesitation.

The snipers spend hours, and hours, and hours training for their work. The vast majority of traders and investors I know spend very little time learning the craft of trading. They believe they can open an account, watch an episode of Mad Money, and go buy a stock. These same people could go to Dick’s, buy a rifle and some bullets, and take it home and fire it. The first action does not make them any more traders than the second action makes them snipers.

Trading and investing, unless you have more money then you know what to do with and you just want the thrill of putting a thousand dollars on black, are not hobbies. They should not be something you decide to do when you “need some extra money,” or suddenly figure out you don’t have enough money for retirement.

If you want to be really good at something, whether it’s trading, or playing blackjack, or even running a landscaping company that focuses on mowing yards, you have to put the requisite time and energy into learning the skills required.

You may hear from professional traders of big trading wins because of gut feelings. That’s a load of crap. Those “gut feelings” are simply learned skills that a trader may not be able to put into words, but they are “feelings” the trader didn’t have the first time they walked onto a trading floor.

In order to be a good trader the second skill you must master is patience. The snipers in Captain Phillips waited and waited and waited.

They waited while their ship was being buffeted by waves. They waited even as they knew Captain Phillips could be killed at any moment. They waited when two of the three had clear shots but the third did not.

These men are not robots. They have feelings and emotions, kids at home, and they would have felt a deep sense of failure if  Captain Phillips had perished. Yet they waited for the optimal opportunity to accomplish their task.

So how did they have patience, knowing what they knew about the situation? They had patience because they had training and they had a plan. They had trained over and over with if/then scenarios until they had a very good sense as to what impact their actions would have on the situation they had been given. “If the target does X and I do A the result will be…failure.” “If the target does X and I do B the result will be…failure.” “If the target does X and I do C the result will be…success.”

They had patience because they knew that when the targets did X, in this case put all of their heads in view at once, then they could execute their orders and do it with the optimal chance of success. They knew this and had the patience to wait for it to play out, because they had run the scenario a hundred, or a thousand times before. They knew the pattern.

All successful traders and investors that I know of have identified a pattern that suits their style. They wait for this pattern to appear and then trade it over and over and over. One of the patterns that I particularly like, and which I talk about quite a bit here at stockwarrantshq.com, is the warrant expiration pattern. This pattern is not one you see every day or even every month, and looking for it, identifying it as an optimal opportunity, and then trading it takes patience.

Once the SEAL snipers identify the fact that the correct pattern is in place it takes them about one-half second to execute their plan. There is no hesitation, no second guessing, only action.

Did they know that once they identified the optimal pattern (three heads in the windows) that they would fire from a rolling ship into another rolling ship and simultaneous eliminate all three of their targets, not injure Captain Phillips and save the day? The answer is a resounding HELL NO. They only knew that this was their best and probably only chance to save Captain Phillips, and when the opportunity presented itself they executed their plan.

Here is where our analogy goes off the rails a bit, but it goes off the rails resoundingly in our favor. What if the snipers had missed? What if they had eliminated one target and only injured two others? Do you think there was a plan in place for what to do in those situations? I’m 100% sure there was.

It may not have gone as well for Captain Phillips, but there was without a doubt a backup plan in place for every scenario the SEALs would have faced if they had not made those incredible shots. As a trader or investor will our identified patterns always play out the exact way we predict? That’s right, a resounding HELL NO.

But, when your trades don’t pan out, nobody dies. And as long as you have a plan in place for what to do next, whether it is to exit the position or have a hedge in place, you can limit your loss and simply move on to identifying the next pattern. You have an advantage over the Navy SEALs.

You don’t actually have to execute “Flawlessly” (as one British paper described the snipers’ actions) in order to do your job well. As long as you have a plan in place to deal with both the winners and the losers, and as long as you execute that plan, you can be a very successful trader.

Learned skills, patience and execution saved the life of Captain Phillips, both on the screen and in real life. Take the lessons of the SEAL snipers to heart in your trading and investing and take pride in a job well done.