Guerilla trading sounds very exotic, suggesting a nimble, dangerous warrior sneaking in to make a quick and devastating attack before disappearing into the jungle. Actually, that’s a pretty accurate description of a guerilla trader. Guerilla trading is both a mindset and a technique that utilizes ultra-fast, low-risk trades to capture profit and exit just as quickly.
A guerilla trader’s trading time frame makes day traders look like buy-and-hold investors. It is even shorter than a scalper’s timeline. Only high-frequency trading systems are quicker than the guerilla trader; a guerilla trader’s time frame rarely lasts longer than a minute or two.
Defining characteristics of a guerilla trader:
- Typically makes 20 or 25 trades in a single session; low commissions and tight spreads are essential for this style of trading
- Master of technical analysis, typically operating with tick or one-minute charts
- Low-risk trades, will trade for a 20-pip profit
- Generally avoids periods of extreme volatility when the risk of loss is highest
- Prefers forex market, although will trade in other markets
- Well capitalized with cash he can afford to risk
The key to successful guerilla trading is mitigating risk and limiting the potential for loss in every trade. You must set profit and loss targets for every trade and set automatic stop-losses to remove emotion from your trading decisions. In fact, you must trade with a level of emotional detachment to have any success at all in guerilla trading.
Guerilla traders tend to trade the trend rather than betting on a reversal and risk runaway losses. They also avoid averaging down, preferring to cut losses quickly rather than trying to recover a trade gone bad.
If you are interested in guerilla trading, start with a highly liquid market such as forex and still to well-known currency pairs. Practice with a simulator or demo account until you get used to the hyper-fast pace of guerilla trades. Develop a trading strategy and plan that focuses on low-risk, low-profit trades and even smaller losses. Be fanatical about mitigating risk with stop-loss protection—and only ever risk capital you can afford to lose, especially in the beginning.