Trading is a form of war. The goal is to extract profits from the market beast that wants you to take your hard-earned cash. Most investors engage in this battle using traditional tactics. They focus on fundamentals, buy-and-hold thinking and look to 'experts' to guide them.
You may make some progress with that approach but, as guerrilla fighters throughout history have learned, the best way to beat a bigger and more powerful enemy is to use tactics that are suitable for small and flexible warriors. According to Wikipedia, guerrilla tactics include ambushes, sabotage, raids, petty warfare, hit-and-run tactics and enhanced mobility.
Above all else Guerrilla Tactics are a mindset. You identify your target and then develop a game plan for an attack. One of the most important aspects of the plan of attack is a willingness to admit you have lost a battle and have a way to escape. You must always be willing to cut your losses, so you can live to fight another day. You will lose many battles on your way to wining the war.
At the heart of a guerrilla approach is the ability to be patient for a long period of time and then to strike suddenly with great force when the time is right. This can be a difficult tactic to master as aggressive traders tend to look for constant action. The ability to sit and wait for the right timing is key. I've written about various ways to enhance your ability to be patient such as using a partial buy and sell approach, but impatience is the biggest stumbling block of most traders.
Not only do you need to cultivate patience and be ready to sit and do little for a long time, but you always have to have the ability to move big, bold and aggressively when the time is right. The ferocity of the attack at the key moment is what will ultimately determine your results.
This ability to wait patiently and then to suddenly spring into action is difficult to master. There is a perception that traders are constantly in motion-buying and selling and making big moves. There may be day traders that do that to some degree but most effective traders operate with stealth. They stalk their targets and stay calm and cool while they do it.
An example of a stock that is one of my targets right now is Clearside Biomedical (CLSD) . The company announced positive results for a drug to treat eye diseases. It gapped up on the news and management quickly priced a secondary offering at $13 which was above the current price. The stock traded very strongly after the offering was priced but has slowly drifted back down after pricing did not hold. It has some substantial targets from analysts but no real catalyst at the moment.
I believe it is just a matter of time before there is some news that pops the stock back up. It has a good story and good targets, but it doesn't have anything to move it, especially when the overall market is weak.
I am using guerrilla tactics to trade this stock. I have a position and will add to it substantially and aggressively when the time is right. For now, I just have to sit patiently and watch it while it develops further. I'll make some small buys along the way while I wait. It may take a while for it to come to life but if I watch carefully I'll be able to pounce in a timely fashion and catch a strong move.
If you aren't the General of a huge mutual fund, then don't handicap yourself by trading like you are conducting a war. Think like a guerrilla and stalk your prey.