Action Forex with Guerrilla Trading
Many people mistake the action forex style of the Guerrilla trader for a Scalper, but these two trading systems are actually different. Guerrilla trading is a short-term trading strategy which employs a timeframe that is shorter than the scalper. The only trading system that has a shorter timeframe than this is high frequency computer trading systems. The success of a Guerrilla trader rests on tight trading spread, high leverage and profit on multiple trades. While it is possible to use this system with any financial market it is best suited to the forex market.
Characteristics of Action Forex Guerrilla Trading
A Guerrilla trader will look to make small profits from each trade, but the number of trades they complete in a single session is high. There are certain characteristics for this trading that you should be aware of:
- Small profits per trade – Guerrilla traders are content with 10 to 20 pip profits on a single trade. This also means that they risk fewer pips per trade. The maximum loss is set to 5 to 10 pip for a trade.
- Very short timeframes – the average trade for this system only lasts a few minutes. If the trade is open for longer than this the risk outweighs the potential gains.
- Large amount of trades – in a single trading session a guerrilla trader can complete 20 or 25 trades. This large scale trading increases the psychological pressure placed on the trader.
- Tight spreads – as this system is based on low profits the trading spread needs to be tight. Most of these traders limit themselves to major currencies because of the assured liquidity.
- Technical analysis – these traders mainly use technical analysis of 1 minute charts and tick charts to pinpoint entry and exit points.
- Experience – new traders should not consider guerrilla trading and is best left to the experienced trader.
Who Should Look at Guerrilla Trading?
The fast paced guerrilla trading is not a system that suits everyone and there are certain people who should steer clear. If you are thinking of using this system you should possess the following personality traits:
- Have trading experience – high-pressure trading is not something to be done lightly and should be left to experienced traders only.
- Emotionally detached – you have to be able to completely detach yourself from any emotions in your trades.
- Fast decision making – as the forex market is unstable the trader must be able to make quick decisions regarding their trades.
- Risk capital – guerrilla traders have to have sufficient risk capital and know how much they can risk on each trade and in their overall trading.
Tips to Guerrilla Trading
If you have determined that guerrilla trading is the best system for you then you should keep some tips in mind:
- Trend trading – one of the best ways to generate a quick profit is to trade on a short-term trend.
- Have stop losses – guerrilla trading hinges on keeping losses low. Having automatic stop losses is the best way to do this.
- Use experienced trader techniques – mitigating your risks is essential to all trading and guerrilla trading in particular. You should not average down or keep any losing positions.