What Is Guerilla Trading?

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Updated: 05 August 2020

guerrilla trading strategy

For most people, the word guerrilla trading evokes images of renegade traders attacking the markets for short-term profits by taking quick trades with minimal risk.

Well, your assumption is spot on because that is exactly what a guerrilla trader does, they focus on making quick trades and profits while minimising their risk exposure.

These are some of the characteristics of guerrilla trading:

  • Guerrilla traders are much faster than scalpers
  • A high volume of trades, over 20 per session
  • Small returns that depend on;
  • Low commissions and tight spreads
  • Small losses

If you're ready to learn more about guerilla trading, let's get started.

Guerilla Trading Strategy

So, how does a guerilla trading strategy work in practice?

A guerrilla trading strategy bears a close similarity to scalping and high-frequency trading due to the large number of trades involved and the short holding periods. The ultimate goal of a guerrilla trader is to make multiple trades, hold them for a few seconds to minutes and then exit with a small profit.

The best example of this type of trading is bond traders who usually trade based on ticks and have a target profit of anywhere from 3-6 ticks. Bond traders also tend to have very strict risk management strategies given the expensive value of their trades.

Such traders are obsessed with minimising their losses given their tiny profit margins. It would take many trades before the guerrilla trader’s account recovers from a huge loss.

What Is Guerilla Trading?

Example of a Guerrilla Trade

A good example of a guerrilla trading strategy is a trader who trades the EUR/USD currency pair, which is the most liquid major pair, with a maximum daily loss limit of $500. Therefore, if the trader risks $10 per trader and makes approximately 25 trades daily, they will incur a maximum loss of $250, which is half their daily limit.

Now, if the trading strategy has a win rate above 50%, and risk: reward ratio of 1:2, the likelihood of the trader being profitable at month-end is quite high. The main advantage of this trading strategy is that the trader always has a fixed risk amount for each trade, unlike in discretionary systems.

Guerrilla Trading Forex

Guerrilla trading for the Forex markets works best on major currency pairs that are the most liquid and have minimal spreads. Guerrilla traders usually target profits of between 10-20 pips on Forex trades, while risking less than 5 to 10 pips per trade. They usually trade very volatile pairs and hold their trades for seconds to minutes.

As a guerrilla trader in the Forex markets, your goal is to make quick trades and books small profits. Your methods are slightly different from those of the scalper as you make your trades based on price movements within tick charts, and 1-second to 1-minute charts. You also hold your trades for shorter durations than the scalper.

What Is Guerrilla Stock Trading?

Guerrilla stock trading involves taking highly leveraged stock trades and holding them for short periods to make small profits. Using guerrilla trading strategies to trade stocks means that your trades are much faster than those of scalpers as you are looking to make very small profits.

Guerrilla Trading Tips

Top tips to become a successful guerrilla trader:

  1. You must watch the market closely and keenly track the assets you trade.
  2. You must focus only on trading instruments that are very liquid
  3. Major Forex pairs and popular stocks such as the FAANG grouping are very liquid.
  4. Trade instruments that have low spreads and commissions to minimise costs.
  5. Beware of large spreads that could eat into your profits.
  6. Make a huge number of trades, 20-25 per day to earn decent profits.

Guerilla Trading Strategy

The Bottom Line

Guerrilla trading is much faster than scalping with lower holding times but is much slower than high-frequency trading, which is done by algorithms. Traders who are scalpers can easily become guerrilla traders if they have faster execution speeds than other scalpers. However, keep in mind that your main competition will be high-frequency trading algorithms.