Use a Rifle, Not a Shotgun – Precision Trading

“Use a rifle, not a shotgun.”  It is one of the most oft-quoted analogies in trading, not to mention about a hundred other areas of life.  The principle behind it is simple.  When you want to get something done and do it right, you are going to accomplish far more by carefully taking aim with a single well-considered shot than you are by shooting pell-mell.  

 

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The phrase refers to the literal difference between how a rifle works vs. how a shotgun works.  A shotgun shoots out a number of small pellets in a wide range.  A rifle shoots a single bullet.  For this reason, you do not need to aim a shotgun as closely as you do a rifle.  Conversely, you will have a much greater rate of success shooting a small, distant target if you are using a rifle.

I am a fan of extended metaphors, and I think it is worth taking a closer examination of this one as pertains to binary options online trading.  While it is true you can achieve better results firing a rifle than a shotgun, part of the reason why lies in the technique and not just the weapon itself.  If you fired a rifle the way you do a shotgun, you would not achieve better results.  

A sniper does not just run into a room shooting all over the place.  He finds a nice, quiet spot, an environment which as private and controlled as he can manage, and then he takes time to line up a shot.  When he shoots, he is as cool and collected as possible.  

When we talk about using a rifle in trading, we are usually referring to a couple of things:

  1. Whatever trading method or system you are using to spot entries.
  2. Searching for the perfect setup within that method’s framework.

The thing is, you have probably noticed by now that two traders can take the same set of rules and get completely different results.  This is something which is extremely frustrating and sometimes quite frightening for traders who are losing money.  Many traders call it quits because they cannot understand why one trader is doing well while they are doing poorly, even though they are using that exact same system.

Think about this for a moment, though.  If you hand a beginner a rifle without instruction and he nervously takes a shot, what do you think is going to happen?  No beginner is just going to miraculously know how to shoot a small and distant target.

A sniper needs to be trained to get good results.  The same is true for a binary options online trader.  Here are the steps you need to take to get to sniping winning trades.

  1. Learn everything you can about your system.

If you were learning how to use a rifle, do you think you would just go out to the range and start firing away?  No.  The first thing you would do is learn about the gun.  You would learn how it works, why it works, and how to operate it.  You would learn the best practices for using it, and you would also learn safety precautions.

It should be the same way with your trading method.  You should start out by learning everything you can about how your trading method works and why it generates results.  You need to understand its strengths and its limitations.  You also need to familiarize yourself with potential pitfalls using it.  Just as you need to know what can go wrong when using a rifle, you need to know what can go wrong if you use your system incorrectly.

  1. Choose the right environment.

A sniper needs a quiet, secluded spot where he can get a good view of his surroundings and where interruptions are going to be minimized.  It takes time and concentration to line up the right shot.  Likewise, it takes time and concentration to line up a good trade.  Shut off distracting programs on your computer, close the door, and make sure you are in an environment where you can focus 100% on trading.  Of course you need to be at a top binary option broker as well.

  1. Practice, practice, practice.

If you wanted to become a great sniper, you would need to go out to the practice range on a regular basis and take shot after shot.  If you want to become a great trader, you need to do plenty of practice with your system as well.  You need to backtest it on historical data and demo test it on live data.  Only after you have practiced again and again will you excel at hitting your target—the perfect trade.

  1. Learn how to trade in different conditions.

If you were a sniper, you could not expect to have perfect conducive conditions for every single shot you were going to take.  Even though you control what you can of your immediate environment by choosing the right spot and waiting for the right moment, there are still going to be factors that are out of your control.  Sometimes the lighting or the weather may not cooperate, or there may be chaos on the battlefield.

As a trader, you are going to encounter all kinds of trading conditions.  Like fog obscuring the sniper’s sight, choppy conditions may throw off your sight as a trader.  There are many conditions that you can learn to cope with.  Like the sniper, you may still be able to line up an excellent shot even in conditions that are not to your liking.  

Here is one area where our metaphor diverges however.  Unlike the sniper, who may have to shoot even in the most unfavorable circumstances, you do not.  Learn to trade in conditions where it is profitable, but accept that there are some market situations which are going to cause you to lose money time and again.  You can (and should) sit those situations out, and wait until conditions are back on your side.  

Still, the markets are always changing, and like the sniper, you will have to be adaptable to change if you want to survive over the long term.

  1. Keep a cool head.

The sniper in our example has to learn another challenging trick, and that is how to control his emotions.  No matter what way you try to look at it, sniping is a nerve-wracking occupation.  You have to sit there and stare through your scope, blind to all else, while you methodically seek out your shot.  When you pull the trigger, you have to control your breathing and heart rate.  Even the tiniest movement in the barrel when you shoot can translate to a substantial miss in the distance.

This too takes practice, but it is essential for results.  As a binary options online trader, you too need to learn how to control your emotions.  If you are panicked or angry when you are planning your trades or when you hit “High” or “Low,” you are going to make a mistake.  And you can bet that mistake is going to cost you money.  Thankfully, the more you practice, the more you learn the skills you need to successfully target those winning trades—which will help you over time to trust your system and yourself and curb those messy emotions.

“Use a rifle, not a shotgun” is a great analogy, and is a popular one for good reason.  And it is actually a much better analogy than a lot of people realize!  It comes down to far more than just taking the time to focus and pick the right strategy and the right trades—it also comes down to learning your system inside and out, practicing, picking the right target and the right environment, and getting into a cool, methodical frame of mind.  Ultimately, it is about becoming an expert.  If you are willing to put in the work and the focus to really do that, you will snipe those winning trades time and again!