Why guerrilla trading is popular with new and time-strapped traders alike
Guerilla trading is a style adopted by investors who want to reduce their exposure to forex and stock markets by making quick entries and exits with the aim of generating profits quickly and focusing entirely on short-term trends.
While ‘scalpers’ are also renowned for trading in a short time frame, they generally look to use higher leverage offered by brokers to make larger trades based on small price changes. Guerilla traders, on the other hand, look to generate smaller profits from multiple transactions within a very short period of time.
Guerrilla trading has recently become popular with beginners and part-time traders due to the lower time investment and risk exposure. When buying a currency pair or stock, positions may only be open for a few seconds. The idea is to dip into the market and then out again, keeping active positions open briefly before profiting.
This is a risk-averse style that differs from day trading, which would be considered more of a long-term style in this context. Guerilla traders want to make a number of small ‘wins’ that add up during a session. This is ideal for someone who has less time during a day, as they do not have to monitor markets as regularly and worry about overnight trends.
The guerilla style can be deployed for a variety of assets, but it usually works best on the foreign exchange market due to the high liquidity and trading volume. When guerilla trading forex, investors usually target major currency pairs such as GBP/USD where the spreads are lower. They are also similar to other investors in that high leverage is used to make larger trades.
How to become a guerilla trader
Low profits per trade is the aim of the game for guerilla traders who usually opt to exit the market after making between 10 and 20 pips. This contrasts with scalpers who usually target anywhere between 25 and 50 pips. Rather than entering and holding a position, guerilla traders try to execute around 20 to 25 trades during a session.
This tactic can be lucrative when important events on the economic calendar take place, such as the release of a new US jobs report or an update from the Federal Reserve. Faster, more frenzied trades are typical on days like this as investors try to get in on the action and take advantage of movements in the market.
While the practice is beginner-friendly, traders still need to conduct technical analysis during the day to determine the best times to enter and exit. Guerilla traders are usually well versed in reading tick charts to reduce market noise and make wise decisions.
Using stop losses
Using a wide range of tools is key to successful trading with a guerilla mindset. You will need to deploy stop losses to offset the risks and prevent losses from mounting up. With this style, keeping losses to a minimum is often just as important as making larger profits. Being able to exit at the right time is crucial.
Guerilla traders usually trade with an automated stop loss that triggers action when a certain price is breached. This sort of disciplined approach is needed due to the large number of trades that are made during a session.
Trading the trend
One reason why this tactic is more accessible for time-strapped investors is that trades can be made with obvious, short-term trends. Rather than having to research and determine a contrarian position that could possibly reap dividends in the medium to long term, guerilla traders can simply, for example, go long on the US dollar after a positive economic story in the US.
These moves are easier to identify and act on and, more importantly for guerilla traders, can generate quick profits when timed correctly. There is no need to trade exotic currencies either, with many being too risky for this strategy. In forex, major pairs are best for guerilla trades.
Temperament also plays a role in this style of trading. Due to the high number of positions taken during a day, traders need to remain emotionally detached and not get too invested in each one, as this can result in positions being held for too long and larger potential losses. Pro traders are very adept at cutting a losing position at short notice.
If you can make quick decisions while remaining calm, cool and collected, then the guerilla trading style could be an excellent fit for you depending on your financial objectives, work situation and day-to-day lifestyle.