Forex Model Portfolios

The basic mindset of trend trader is "Am I right or am I out?" The implied bet all trend traders make is that price will continue in its present direction. If it doesn't, there is little reason to hold onto the trade.

Therefore, trend traders typically trade with tight stops and often make many probative forays into the market in order to make the right entry. Trends can be thought of in varying lengths including short, intermediate and long term. If one can identify a trend, it can be highly profitable.

True range traders don't care about direction. The underlying assumption of range trading is that no matter which way the currency travels, it will most likely return back to its point of origin. In fact, range traders bet on the possibility that prices will trade through the same levels many times, and the traders' goal is to harvest those oscillations for profit over and over again.

As sure as day follows night, very quiet non-volatile periods in the market are followed by sudden bursts of activity and large price movement. Conversely after a prolonged trend move, prices open consolidate and spend a substantial amount of time channeling in a tight range as market players adjust to new price levels.