The Guide to Guerilla Trading

Are you the kind of trader who uses the news about the events on the foreign exchange market as basis?

Are you the kind of trader who places a lot of trades?

Are you the kind of trader who stays in a position, then, quickly exits?

Are you the kind of trader who is more than okay with gaining a small income of around 15 pips per trade?

If you are all of that, guerilla trading is for you.

What Is Guerilla Trading?

Guerilla trading is the trading technique that describes the ability to profit little amounts out of multiple transactions; it’s a strategy of gaining from an accumulated wins while guaranteeing that risk is kept to a minimum. It works best in a trading environment with high leverage, low commissions, and tight spreads.

By some novice traders, guerilla trading is mistaken as the same with scalping. Yes, both trading techniques have similarities; both of them dwell on the concept of profiting with quick positions. A primary difference of guerilla trading is that the timeframe in consideration is very short; it’s shorter than that of scalpers. In fact, from the looks of it, the guerilla trader makes an intraday trader look as if he’s a long-term investor.

Determining Factors

The objective of guerilla trading is to make money from low returns for every trade; the risk potential for profit that a guerilla trader allows is small, and so is his risk potential for a loss. The idea is to trade a bunch of times in each trading session for the total winning position to justify the incurred risks.

Let’s Look at an Example

An example of guerilla trading involves a trader who executes 25 JPY/USD trades, with $500 as the highest amount for each trade. In such a case, the risk potential for both profits and losses is only 2 % (i.e. $10 for each trade); if he lands 22/25 winning positions, he can profit $220, and his loss potential from 3/25 losing positions comes down to only $30.

Here’s to Success

One of the secrets as to why guerilla trading can be incredibly profitable is that it is the trading technique of the experienced forex traders. Although it is fast-paced, it is a strategy that requires careful risk-calculation; the placement of stop-loss orders for each trade is rather strict and these traders don’t let their emotions get the best of them. And, as the pros would advise their novice fellows, it’s best to be familiar with the ropes of the forex market first prior to joining the team.

Credit and References: Basic strategies tips have been taken from http://www.admiralmarkets.com/education/articles/forex-strategy and http://www.investopedia.com/forex/strategies/