Difference between Directional and Non Directional Trading Strategies

Directional and non directional trading strategies are two types of strategies used by all traders, regardless of the type of financial market. These two categories may require various approaches as well as different levels of trading education and requirements.

There are major differences between the two types of strategies. The directional trading strategies are those that involve short and long positions that traders may opt to hold in the forex market or whatever financial market they are into. The non directional trading strategies on the other hand do not take any short or long positions, the exact opposite of the other type.

Traders more commonly take the directional type since it is less complex that the other type. An investor will profit from it when instruments’ prices that are in the long positions will rise and when there is a drop in the prices of the instruments in the short positions. With the non-directional strategies, the systems are quite complex and expert automation is required.

The directional strategies are simpler and flexible and easier to follow and may be used in all types of markets aside from the forex market. Although the non directional may be more complex, it is nevertheless very effective. It is actually more suitable to those big time traders having high position sizes. The risk in the latter is also minimized by the need for calculated diversifications.

The use of the two types of strategies largely depends on the type of trader you intend to be or already are. It is best to have knowledge of both but adopt the ones that could make possible for you bigger success.

Timothy Stevens is a Forex Options Trader who owns http://www.NonDirectionTrading.com – He has helped hundreds of people on Trading Forex with Options.

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