A cursory glance down any trading website will show up an enormous list of ways to approach the trading of forex, stocks and more. And one term that is becoming increasingly common alongside terms like “scalping” and “day trading” is guerrilla trading: a strategy that requires the opening and closing of a market position in a very speedy way, on the assumption that repeating this will lead to accumulated profits. But what’s involved with guerrilla trading? What are the goals of the strategy, and what sort of trading mindset is required to be in with a chance of making it successful? This article will delve into more detail.
Terminology: what is guerrilla trading?
Guerrilla trading refers to the practice of instant, short-term trading tactics which aim to make as much profit as possible with as little exposure to risk as possible. On the face of it, it may seem like all traders have that aim. But a longer-term trader would, in contrast to a guerrilla trader, perhaps accept more risk and then mitigate it through the use of risk management tools – such as portfolio diversification, or the hope of long term trend reversal. For a guerrilla trader, the profits are to be made in the here and now.
Aims of guerrilla trading
As with all traders, the guerrilla trader is out to make money. For the guerrilla trader, there’s an added aim – to make the profit as quickly as possible, even if that means it’s only a small amount. As is the case with a scalper, and to a lesser extent a day trader, the guerrilla trader will only keep their position for a very short space of time and sell it at a profit – or, at least, sell enough positions at a profit over the course of a day.
The guerrilla trader’s context
As an educational website like AskTraders makes clear, a guerrilla strategy for stock market or another financial market can only really work well if it’s happening in a set of conditions that are friendly. First off, the sheer frequency of trades that a guerrilla trader is likely to be placing will mean that low or non-existent commissions are essential. Being able to trade on the margins is also helpful, as this will help free up capital to place as many trades as possible. A highly liquid market, such as stocks or foreign exchange, is often selected by guerrilla traders given that it facilitates quick entrance and exit to the market.
Who’s best for this?
As is the case with all varieties of trading, not everyone suits guerrilla trading. On the contrary, only some traders are set up for it – and whether or not you fall into that category depends in part on your attitude to fast-paced financial environments.
First off, a guerrilla trader needs to have patience and stamina in order to make it work. The guerrilla trading process requires sitting at a computer for a large part of the day and keeping a very close eye on the fluctuations of the market in order to spot the ideal moment to break in and open a position. This is often as short as a minute or two, and hence may be a response to an announcement or market movement. Keeping this up and doing it over and over again until the reward is worth the time, requires concentration.
The guerrilla trader may also find that they need to be ready for a protracted search for a broker, or an argument with their existing one. Not all brokers accept those who want to trade on a guerrilla basis, just as they may turn away those who want to follow a scalping pattern. There may be some research required on the part of the guerrilla trader in order to identify as a suitable broker who permits this sort of trading behaviour and, as a result, the strategy might not be right for those who want to simply plunge in and get started with their trading journey right away.
Ultimately, it’s up to the individual trader as to whether guerrilla trading is the right approach for them. For some, the fast-paced schedule is worth it, but for others, the barriers will be too high. If you’re unsure as to whether or not guerrilla trading is right for you, it might be worth using a broker’s demo account and experimenting with the strategy to see how you feel executing it – or seeking out the services of a financial advisor.