Nick Katiforis

Directional vs Non-Directional Trading

Getting the direction of the market right is one of the most difficult things for any trader to do on a consistent basis, including experienced professionals.

With markets only trending approximately 15% of the time, it means that most market price moves will be random up and down. Very frustrating for the direction picker.

Buying options with ample time to expiry is one way to help overcome this obstacle, by giving the market time to do its thing.

Another way is to use written options to create neutral strategies which are less vulnerable to short term market fluctuations. These strategies include written straddles and strangles. Basically you hedge your bet by writing puts and calls simultaneously.

A moderate move in one direction will be positive for one side of your trade and negative for the other. You may need to adjust if the position becomes unbalanced as a result of a significant market move, while letting time decay do its work.

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