What Are Non Directional Trading Strategies?
There are two main strategies being adopted by many traders that may require various types of approaches. One of the most used is the non directional trading strategies, the other being the directional trading strategies. The former, also called neutral strategies, is when traders do not take any net short or long positions and instead manages to match his positions wisely.
Non directional trading strategies however are quite complex and may require pre-defined trading guidelines and rules as well as a very good automation. These types of strategies, e.g., pair trading strategies, arbitrage strategies, sector matching strategies, etc., are used by the so-called big players, the expert traders.
The non directional trading strategies are ideal for the large scale trader that usually holds high position sizes. These strategies are of lower risk since it demands well-calculated diversifications. It also involves little or no emotions since there is less human interference when trades are made according to strategies that are pre-determined. With this type of strategies, traders are offered less trading risks whether they use innovative or traditional styles.
Just as many other things, non traditional trading strategies also has disadvantages. Firstly, this cannot be used in all the types of markets and financial instruments. Also, the use of this style will require great forex market knowledge as well as complicated trading systems. Lastly, there would be a need for a higher degree of money management with this type. However, the advantages still outweighs the disadvantages. This is the reason more and more people are adopting this type of strategies.
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