Guerrilla Trading

AAA

DEFINITION of 'Guerrilla Trading'

A very short-term trading technique that aims to generate small profits while taking on very little risk per trade and repeating this multiple times in a trading session. Guerrilla trades typically have a shorter duration than scalping or day trades and seldom last for more than a few minutes, at the most. Because of its high trading volume and limited return nature, low commissions and tight trading spreads are prerequisites for successful guerrilla trading. As it also demands considerable trading expertise, guerrilla trading is generally not recommended for novice traders.
 

BREAKING DOWN 'Guerrilla Trading'


While guerrilla trading can be applied to any financial market, it is particularly well suited for trading foreign exchange. This is because the major currency pairs typically have very tight trading spreads because of their plentiful liquidity that is virtually available around the clock. Many online forex brokers also offer levels of leverage to traders for trading currencies that are much higher than that available on equities.
 
But these elevated levels of leverage – which may be as much as 50 times the trader’s capital – represent a high-risk, high-reward scenario that can wipe out an inexperienced guerrilla trader in a few trading sessions. The ability to cap the loss on an unprofitable position quickly, before it spirals out of control, is therefore an essential trait for a guerrilla trader. With a profit objective that is limited to 10 to 20 pips per trade, guerrilla traders generally rely on advanced technical analysis systems for trading signals.

Ready to go further in understanding guerrilla trading? Read Introduction To Guerrilla Trading

RELATED TERMS
  1. Currency Day Trading System

    A set of analyses that the forex day trader uses to determine ...
  2. Late-Day Trading

    An unethical (if not illegal) practice of a hedge fund purchasing ...
  3. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
  4. Mirror Trading

    A forex strategy developed in the late 2000s that allows investors ...
  5. Automatic Execution

    A method of executing trades without inputting them manually. ...
  6. Funding Currencies

    Monies that can be borrowed at low interest rates, making them ...
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Day Trading

    This article will take an objective look at day trading, who does it and how it is done.
  2. Active Trading

    Adjusting Day Trading Strategies For Different Market Conditions

    Being a successful trader means knowing when to play the market and how. Find out what strategies will have you on top.
  3. Forex Education

    5 Forex Day Trading Mistakes To Avoid

    We will look at five common mistakes that day traders often make in an attempt to ramp up returns.
  4. Trading Strategies

    Day Trading Strategies For Beginners

    From picking the right type of stock to setting stop-losses, learn how to trade wisely.
  5. Forex Education

    Top 6 Most Tradable Currency Pairs

    Outlining six of the forex market's most tradable currency pairs.
  6. Trading Strategies

    The Top Spread-Betting Strategies

    What are the most commonly followed spread-betting strategies (in countries where it's legal)?
  7. Forex Strategies

    How To Avoid Exchange Rate Risk

    What are the best strategies to avoid exchange rate risk when trading?
  8. Mutual Funds & ETFs

    Currency-Hedged ETFs: Should You Invest?

    Currency-hedged ETFs offer many more pros than cons when compared to their counterparts, but there is still one big con.
  9. Forex Strategies

    Benefits & Risks of Trading Forex with Bitcoin

    Want to trade forex using bitcoins? Don’t jump on the bandwagon until you compare the risks to the benefits.
  10. Forex Strategies

    How To Trade Forex With Bitcoin

    We look at ways to trade forex with bitcoin and the pitfalls in doing so.
RELATED FAQS
  1. How do I Implement a Forex Strategy when spotting a Sanku (Three Gaps) Pattern?

    A forex trading strategy can easily be implemented to profit from a market reversal signal that comes from the sanku, or ... Read Full Answer >>
  2. What's a good forex strategy to use when spotting a Wedge-shaped Pattern?

    Use wedge-shaped patterns to identify bullish or bearish price action when trading currencies in the foreign exchange (forex) ... Read Full Answer >>
  3. How do I use Time Segmented Volume (TSV) for creating a forex trading strategy?

    You could use time segmented volume (TSV) to build a forex trading strategy, which allows you to compare volume data to determine ... Read Full Answer >>
  4. How do I close a long position in forex?

    Closing a long position in forex trading depends on whether you are using a broker operating under U.S. trading regulations. In ... Read Full Answer >>
  5. How do I implement a forex strategy when spotting a Upside Gap Two Crows Pattern?

    The upside gap two crows is, in theory, a bearish reversal pattern found in both the stock and forex markets. While there ... Read Full Answer >>
  6. What are the most common market indicators forex traders follow?

    There are literally hundreds of technical indicators for forex traders to choose from, however, there are a few which may ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!