* Once you have determined the direction, next, what levels should you look out for buying or selling opportunities? Position traders and scalpers buying strategy often differ. Position traders buy when the prices dip in an uptrend or sell when price rally. On the other hand, scalpers buy at a breakout of resistance and support levels when there is a momentum in buying or selling respectively.
* Trading a dip offers a lesser risk reward ratio than trading a price breakout. This is because position traders will buy low and sell high while scalpers will buy high and aspect price to go higher for a profit.
* Trading a breakout is exciting and usually it is a momentum trading. For example in an upside breakout trading, many sellers would turn buyers and scalpers will exploit the buying momentum for a quick profit. Therefore, in terms of risk with reference to holding time, scalpers tend to have lower risk as they would have exited their position within minutes while a position trader may still be holding on to a trade, exposing their trades to any unforeseen spikes in the market.
*As a scalper, you must have great confidence in trading a breakout. At times, scalpers may be trapped in a falsebreak where price did not follow through after a breakout. How to prevent a falsebreak? There is no 100% method to prevent a falsebreak. To offer a higher probability winning trade, scalper may place a buy stop or sell stop order a few pips above the resistance or below the support to trade the breakout respectively. Some scalpers may wait and only execute the trade after a clear breakout.
