If you’ve found this page, you’ve heard someone say “Buy The Dip” or “Buy the f’ing dip!” or even “BTFD!”
This phrase of modern markets means something rather simple: when price drops a certain amount, buy. It literally means, buy the dip. Or if you don’t know what dip means, buy the price drop.
I made this simple image to illustrate what buy the dip means:
There are few ways to buy dips and this post is going to explore them. By the way, if you would rather watch me on video dive into this topic, please head to my Youtube page for more. Let’s begin.
Buy The Dip Full Walkthrough
Now, it’s important to be clear about one really important thing: buy the dips work best when they are systemized. This means you don’t randomly buy dips. That’s what rookie investors and traders do. They just buy, randomly, without much thought. If you want to buy the dip the right way, you will follow a plan.
You will also understand that buying the dip only works when something is in a clear uptrend and you’ve done enough research to identify that uptrend.
Here are some ways you could buy the dip:
- Buy the dip after every 10% drop in price.
- Or buy the dip after every 20% correction.
- Or even buy the dip each time its PE ratio drops below 15.
- And also buy the dip when price breaks a moving average.
These are just examples, but hopefully you get the point. You are buying based on specific rules. They could be created by you or a financial advisor or someone else. But they are meant to structure your decision-making. Never, and I mean never, just randomly buy a dip. That’s what most rookies get wrong.
Here’s a chart showing what would happen if you bought the dip at Apple’s 100-day moving average each time. That would have been a great trade:
The Risks
There are all kinds of ways to buy dips. But there should be something mentioned here as well, especially for new traders and investors. I am going to write it very clearly.
Nothing only goes up. No trade wins 100% of the time. Not every dip is a guarantee.
This is important to write because some people really do get carried away with an investment or trade. They go crazy for it. Obsess over it. Some even think that one stock will go up forever and ever. It just does not work like that. And not all dips work perfectly. Sometimes you really do have to run! Take a look at this:
It’s also important to remember what the opposite of buying the dip is. The opposite is buying something in a downtrend. And continually doing that. The results are not good. This is why buying the dip, no matter how funny or great as it sounds, is really difficult and not easy to do.
Remember The Basics
Buying the dip means you are buying in an uptrend. And when price drops based on a specific set of criteria, you buy. That criteria is defined by you. There are no easy answers here on how you define that dip buy. It takes hard work, research, and quite a bit of studying. Some people will even get a professional to do it for them. That’s totally normal.
The basics are this:
Finding something that’s in an uptrend.
Buying when price drops to a certain point.
Repeat that process on each dip.
You’ve now bought your first dip! Or maybe you just came here to learn a little more. Thanks for reading.