Guerrilla investment strategy
“Guerrilla trading”, as the colorful name suggests, refers to investment strategy, which is used by clever investors who enter and leave the forex market in short periods of time. This tactic of investing aims to generate quick profits and minimize the risk to zero. A characteristic feature of guerrilla investing is trading for very short periods of time, shorter even than investors who use the scalping strategy. As a result, investors who use a day trading strategy, look like long-term investors in comparison. Only some automatic trading systems have a shorter investment periods than a trader employing a guerrilla strategy.
Since the main objective is to develop small profits multiplied by large number of transactions,a successful investor who is implementing this strategy depends on low commissions, high leverage, and most importantly, narrow spreads. Hence, guerrilla trading, although it is possible to apply to any financial market, is most suitable for the foreign exchange market. It is especially effective when investing in the major currency pairs, which are characterized by considerable liquidity and low spreads.
Characteristics of guerrilla trading
The main goal of any investor applying this strategy is to develop low returns from every investment while opening multiple entries in the same session. This way, the total profit of all the items is sufficiently high enough to justify a higher level of risk connected with a short-term investment.
Very short duration of investments: investment for the average guerrilla trader takes at most a few minutes. Rarely this time is exceeded. This is due to the fact that the longer a given investment, the greater the risk that it could bring a loss.
Small profits, even smaller loss: while guerrilla investing a profit of 10 to 20 pips from a single position is sufficient, while for example scalping investors are waiting for a profit of 25-50 pips. This means that when guerrilla investing trader can’t afford to risk losing more than a few pips. It is understood that unsuccessful item should be closed after reaching a loss of 5 to 10 points.
Large number of investments: investing in line with this strategy, traders can open up 20-25 positions in a single session, if the conditions for such intense trade are favorable. This situation typically occurs after the announcement of important data from global economies, eg. the number of new jobs in the US or announcement of the investment data.
Technical Analysis: Due to focusing on short periods of time when investing, guerrilla traders rely on technical analysis only when selecting their opening positions. Investors usually use on the minute graphs when deciding to open or close positions.