Friday, 15 March 2019

How to Guerrilla Trading Strategy.

Many techniques can be used to harvest dollars from the forex market, one of which is using guerrilla trading techniques. The word guerrilla itself is often associated with battle tactics that are not officially tied to the provisions of war (usually carried out secretly and suddenly). The number of soldiers involved in guerrilla warfare is usually small, but each of them is trained to carry out battles in a fast, focused, and very effective manner.

Quoted from Investopedia, guerrilla trading is an entry and exit technique in the forex market very quickly to get a short profit, and a minimum risk setting. In other words, this guerrilla trading technique uses a very short Time Frame, even shorter than a Scalper. A trader who uses this technique will usually make transactions on the forex market repeatedly in a trading session. This is not a problem because they rarely hold positions in minutes.

Guerrilla trading techniques do sound quite interesting, but are very risky. Therefore, beginner traders are generally not recommended to use guerrilla trading techniques. On the other hand, there are several factors that influence the success of guerrilla trading, including low commissions, high leverage, and no less importance, namely low spreads. This is what then makes guerrilla trading very suitable for use in the most liquid pair, because the spread is the lowest.

Characteristics of Guerilla Trading
As explained above, the workings of guerrilla trading are to get low profits for each transaction opened. Meanwhile, in order to increase profits and minimize risk, guerrilla traders will open many positions simultaneously in one trading session. So, the point is to open many positions at one time, then immediately close the position quickly. Based on this pattern, we found several characteristics of guerrilla trading, including:

1. The Longer Hold Position, the greater the risk

Loss can occur due to many factors, one of which is holding the position too long, or not immediately closing the position when it is floating profit. Guerrilla traders will anticipate this by holding positions no longer than a few minutes. The reason is, if you have already applied guerrilla trading techniques, and the time spent on one trading session is too long, the risk will also be greater.

2. Both small profits and losses

A guerrilla trader is usually satisfied with profit of 10-20 pips per transaction. Unlike Scalper, which might target double profits, in the range of 25-50 pips. Therefore, the target loss will also be set in proportion to the target profit earned, namely at level 10-20 pips, or it can be half.

3. Opening Many Positions Ahead of News Release

Ahead of the news release, usually the market will move very volatile. This is common when there are important economic data released, such as Non-Farm Payroll, Interest Rate, CPI, and so on. This opportunity is used by guerrilla traders to harvest profits faster. They will open approximately 20 to 25 positions at a time when the situation is conducive.

4. Depends on Technical Analysis

Because the focus is very short-term trading, guerrilla traders usually rely on Technical Analysis to determine when the best time to enter the market. They are usually proficient in estimating 1 minute price chart movements with the help of several indicators, such as the Moving Average to determine the trend, and the Oscillator to determine the volume of Overbought and Oversold.

5. Prioritizing Low Spreads or Commissions

Because of having to hurry out of the market, guerrilla trading techniques put forward the low commissions and spreads in trading. There are several factors that influence this, including currency pairs, as well as the selection of brokers. Usually, this type of trader will enter in major pairs such as EUR / USD, GBP / USD, AUD / USD, USD / JPY and USD / CHF. Why? Because the pair is guaranteed liquidity and has a low spread. The chosen broker must also be right. Guerrilla traders will prioritize brokers with low Spreads (even Zero Spreads) and small commissions, to smooth out the guerrilla trading action.

6. Not recommended for beginners

The ability to become a successful guerrilla trader is not obtained instantly. It takes hard struggle and high flight hours to hone the sharpness of intuition in guerrilla trading. With enough experience, this type of trader will be able to deal with a variety of bad situations that occur when prices move beyond plan. For beginners, this technique is not recommended because the risk is very high. Moreover, when prices suddenly fluctuate (up or down at high speed), while newbies still have to think what to do next? In blank conditions like that, the risk of losing capital quickly is even greater.

7. When the market is too ferocious, Wait And See is the right choice

Under certain conditions, prices will move too fluctuatively so it is very difficult to predict the right entry point. Guerrilla trading techniques take full account of the potential sharing of potential risks. When market conditions are very volatile, risk of loss also increases. Therefore, wait and see can be the right solution. This type of trader will resume its action when the market is calm and price movements are more easily identified.

Example of Guerilla Trading
What is the implementation of guerrilla trading? Here's the simulation:

A guerrilla trader has a Balance of 5000 Dollars on a Zero Spread account. He will open 10 positions for 1 Lot in EUR / USD pair with the following specifications:

Moments later, the results came out. Of the 10 transactions, 7 times win and 3 times loss. Then the total net profits obtained are as follows:

From the example of guerrilla trading above, it shows how tight Money Management must be applied, do not forget to always insert it with Stop Loss. Why? Just imagine, if Win Rate decreases from 70% to 60%, then the net profit has decreased to $ 375 only.

Requirements to Become a Guerrilla Trader
Anyone can actually become a guerrilla trader. But keep in mind this one thing, whatever is chosen, be it a Scalper, Swinger, or guerrilla trader, all do not escape the risk. So to be successful in guerrilla trading, some of the properties below must be possessed:

1. Can Take Decisions Quickly and Accurately

The most important thing that guerrilla traders must have is making decisions quickly and accurately in a short time. Sounds difficult, but in reality this is what must be done. The famous forex market often changes especially in small time frames, so traders must be able to adapt to this situation quickly.

2. Can Trading Without Emotions

What's done is done. Let bygones be bygones. A successful guerrilla trader must enter the market without involving emotions at all. So, when the open position turns out to be a lot of loss, they should not be too sorry for the decision that has been made. Conversely, if you profit a lot, they also have to be able to refrain from greedy or greedy attitude, which can lead to lust for overtrading.

3. Always prioritize money management

Every guerrilla trader must know exactly how much resistance he has. Even Money Management calculations also need to be recorded in trading journals, and applied strictly when entering the forex market. This is important so that you can find out exactly how many lots are safe to transact when opening a position, and be able to make a clear picture of how much total loss and total profit that will be obtained when exiting the market at high speed.

4. Qualified Trading Experience

It took years of experience to master guerrilla trading techniques. They must have felt various difficult situations and high pressure when entering the forex market. Starting from failed profits, Margin Call, wrong open position, and so forth. Sometimes the confidence in the opportunities for profit in front of you can disappear instantly when the market moves against the position. With the existence of a qualified trading experience, this type of trader will be resilient and have a strong mentality to face the rigors of the forex market competition.

Guerrilla Trading Tips
In order not to fall into crocodile holes (or experience fatal loss), several things need to be prepared in guerrilla trading, including the following:

1. The key is Stop Loss

Discipline in trading must be properly enforced, especially in managing Stop Loss. Why? Because the speed of guerrilla trading can overwhelm traders in manually overseeing floating positions. Thus, SL that can run automatically in limiting losses is certainly very necessary. This also ensures that all opened positions have an acceptable amount of risk according to the risk tolerance limit.

2. Trend Following Trading

Trading by following a trend is the best strategy for guerrilla traders. If you are a news trader, please keep abreast of the latest economic news on Forex Calendar. For example, recently announced the release of positive US economic data. Usually, the USD will move long, while the opponents will be EUR, GBP, AUD and NZD will move short. This kind of data release is usually a sign of the emergence of a new trend, and the entry position should be opened following it.

If you are a technicalist, trend changes can be identified using the Moving Average indicator and Price Action confirmation. Trend changes can be identified when prices move across the MA line and are closed below or above it. After that, confirmation is obtained when a candlestick formation is formed which indicates forwarding or price reversal.

3. Apply the Averaging Technique in Certain Conditions

Limiting the loss that occurs can be done in various ways, one of which is applying the Averaging Down technique. The implementation of the Averaging Down strategy is as follows. For example, the first position is opened with a Buy entry. It turned out that prices dropped and floating minus also happened. This is where the Averaging Down technique can be applied to prevent floating minus from getting wider, that is by opening a Buy position again in a certain range of price intervals. The hope is that when the second Buy position is opened, the price will move up and can treat losses that occur in the initial position.

Perform this Averaging technique with careful analysis, and always confirm the direction of price movements by using Momentum Indicators or Trend Indicators.

Read to  How to Become a Binary Options Trading Expert?
Raed to  Trading Strategy For Forex Traders

Related Post

Post Top Ad

Your Ad Spot