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Guerrilla trading vs other short-term trading strategies – which is the best?

If you have been furloughed and find yourself with more time on your hands, or if you are trying to secure a secondary income stream, you may well have dipped your toes in the water of stock and forex trading.

Lots of businesses are thriving in Wales despite the pandemic, and investing in these – and those further afield – can be a profitable exercise.

You may have tried various techniques to maximise your return, whether you have invested in a stock for the long term or have dabbled in the markets across a single session.

One intriguing option is the guerrilla trading strategy, where you look to lock in a profit from a series of trades that are kept open for a couple of minutes or even seconds in some cases.

The idea is that you minimise your exposure to market volatility while locking in a series of quick and consistent – albeit small – returns. That’s the plan, anyway.

There are other short-term trading strategies, of course, so if you are looking to make a second income or spread your wings in stock/forex trading, let’s see how the guerrilla technique stacks up against the rest. 

The pros and cons of guerrilla trading

The pros of guerrilla trading are self-evident, really – this is a strategy that aims to reduce risk while securing repetitive gains made within a matter of minutes.

As long as you are disciplined and don’t get greedy or chase your losses, guerrilla trading can be a very effective technique for tip-toeing into profit. Set yourself a profit target and stop/loss point – just a couple of ticks either way – so that you can calculate a risk/reward ratio that suits you. For example, do you want four ticks of green for every two ticks of red, meaning that you will turn a handy profit if you are ‘right’ with 50% or more of your trades?

This is the key to guerrilla trading because, if you have one bad loss, it can wipe out all of your ‘little’ wins in the blink of an eye.

Another perk of the guerrilla strategy is speed. You can lock in lots of mini profits within your trading session, and unlike other short-term trading strategies, you really don’t want to be occupying a position for any great length of time. With scalping and the like, it may take longer to reach your profit target.

One of the main drawbacks of guerrilla trading is that it is time-consuming. While you can automate the process to some extent using software, for the most part, you will need to watch the market patterns, look for triggers on the charts, and manually execute the trade.

This is not a set-up that suits everybody, particularly those looking for passive income with minimal intervention.

We also have to consider market conditions. If you are trading with a broker whose spreads are out of control, or where liquidity is low for that particular forex pair, you are going to find it very difficult to release a profit even when your trade itself has been successful – so guerrilla trading relies heavily on quality trading brokers and perfect market conditions.

We also have to come back to that word ‘discipline’ once more – without it, no trading strategy can work, but techniques such as the guerrilla strategy are particularly hamstrung if you don’t exit the market at your pre-determined point.

The pros and cons of other strategies

Scalping and guerrilla trading are very similar in nature, but the former can typically bring greater rewards with positions left open for longer periods of time.

With day trading, your positions are open for considerably longer, and this may necessitate a wider set of goals when it comes to take profit and stop/loss settings. Consequently, your win rate may come down, but the amount of green that is earned from a winning trade may be higher – where you sit on that continuum will determine which short-term trading strategy you deploy.

The main con of short-term trading strategies is their greater exposure to the market when compared to the guerrilla technique. Day trading could require a position being open for hours, and even scalping necessitates a longer span than guerrilla trading.

If the market moves favourably, then great! But if it doesn’t, you can see how longer-form trading strategies can eat dangerously into your investment account.

Which type of trader can benefit the most from the guerrilla strategy?

Given its risk-averse properties, the guerrilla strategy is perfect for any trader – but especially newcomers to trading and those who are experiencing the volatility of the markets for the first time.

Guerrilla trading also suits those who are short on time. Even if you only have an hour to trade, you can still open 20 or more positions using the short-termist style, and if, say, 10 of those are green trades at an agreeable risk/reward ratio, then you can turn a profit even in your lunch hour.

There are drawbacks to guerrilla trading, as mentioned in this article, but there are also many perks that ensure that this is a worthwhile technique to explore.