Directional
A strategy whose return depends on the direction of price movement, taking long or short positions according to an expected path rather than a spread or a differential.
Why it matters
Directional strategies are the easiest to explain and the hardest to size. Their return is path-dependent, their drawdowns cluster, and their capacity is bounded by the liquidity of the instruments they trade in the direction they want to trade them. Trend following is the canonical example.
What it is not
These are routinely confused with Directional. The distinctions are not pedantic — each one has consequences for how a system is governed.
Long-only is a constraint. Directional describes the return source and permits both sides.
Relationships
Typed edges into the rest of the ontology. These are what make the canon traversable rather than merely readable.
| Verb | Target | Meaning |
|---|---|---|
relatedTo | Cross-sectional | An association too weak or too general for a stronger verb. |
Record
| Canonical identifier | QIS-TERM-00033 |
| Status | Canonical industry term |
| Adoption | Widely used |
| Domain · Layer | Strategy families · Capital |
| Origin | Standard classification in systematic investing. |
| Semantic aliases | None recorded. |
| First published | 2026-08-02 |
| Last reviewed | 2026-08-02 · 180-day cycle |
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