What is Guerrilla Trading?

Guerrilla trading is a short-term trading technique that aims to generate small, fast profits while also taking on very little risk per trade. This is done by repeating small transactions multiple times during one trading session. While guerrilla trading resembles scalping, the trades take place at a much faster rate, lasting for a few minutes at the most.

Because of its high trading volume and the expected small returns, guerilla trading is most successful when there are low commissions and tight trading spreads. The technique also demands considerable trading expertise so it is not recommended for novice traders. Guerrilla trading derives its name from the strategy of guerrilla fighting, a fighting technique that is highly unorganized and irregular and takes place within a larger conflict. The word "guerilla" is also an adjective used to describe unorthodox and impromptu activities.

Key Takeaways

  • Guerrilla trading is a short-term trading technique that aims to generate small, quick profits while taking on very little risk per trade
  • Guerrilla trades typically have a shorter duration than scalping or day trades and seldom last for a few minutes at the most.
  • While guerrilla trading can be applied to any financial market, it is particularly well suited for trading forex.

How Guerrilla Trading Works

While guerrilla trading can be applied to any financial market, it is particularly well suited for trading forex. This is because the major currency pairs typically have very tight trading spreads as a result of their plentiful liquidity and you can trade forex virtually around the clock. Many online forex brokers also offer traders who are trading currencies much higher levels of leverage than what is available on equities.

But these elevated levels of leverage–which may be as much as 50 times the trader’s capital–also represent a high-risk, high-reward scenario that can result in huge losses for an inexperienced guerrilla trader in just a few trading sessions. Therefore, the ability to cap the losses on an unprofitable position quickly is 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.

Example of a Guerrilla Trade

An example of a guerrilla trading strategy is a trader who authorizes multiple USD trades, setting a maximum amount of $500 per trade. If the trader had 25 trades and risked only $5 per trade, the maximum loss incurred would be $125. If the trader has a strategy that could win on a majority of the trades, they could profit and while also being aware of the maximum downside risks.