Non-directional trading is fascinating. You know, the idea to be able to make money no matter witch way the market goes. That sounds wonderful! You'd make money no matter what.
Options trading has its version of this. It's called delta-neutral trading. Funny thing. It never seems to work just right.
It's the same in forex. There is a catch. (Dang, you just knew there had to be one!) The problem with non-directional trading in forex is it doesn't have a clearly defined edge in the market. You could end up in a hedged loop forever (you are always negative pips in a hedged loop).
That's the theory. Nonetheless, many people do it and do it successfully. Let me give you the bare bones method here. You decide for yourself.
You enter the market (let's say you buy). If the market moves 15 pips your way, you exit. That's your profit.
On the other hand let's say you bought, but the market fell 15 pips. Now you don't exit, you put in a hedge order. If the market keeps falling, you close out the hedge order at a profit and work the negative buy order up to break even and exit it too.
Now the problem happens when the price doesn't allow us to neatly close out the hedged order. We may have to rehedge. Now we've paid the spread 3 times, plus we're negative 30 pips.
That's how non-directional trading works. Sure (in theory) you don't care which way the market goes, but that doesn't mean there's no risk.
