"Buy the dips" is a common phrase investors and traders hear after an asset has declined in price in the short-term.
After an asset's price drops from a higher level, some traders and investors view this as an advantageous time to buy or add to an existing position.
The concept of buying dips is based on the theory of price waves. When an investor buys an asset after a drop, they are buying at a lower price, hoping to profit if the market rebounds.
Buying the dips has several contexts and different odds of working out profitably, depending on the situation.
Some traders say they are "buying the dips" if an asset drops within an otherwise long-term uptrend. They hope the uptrend will resume after the drop.
Others use the phrase when no secular uptrend is present, but they believe an uptrend may occur in the future.
Therefore, they are buying when the price drops in order to profit from some potential future price rise.
If an investor is already long and buys on the dips, they are said to be averaging down, an investing strategy that involves purchasing additional shares after the price has dropped further, resulting in a lower net average price. If, however, dip-buying does not later see an upturn, it is said to be adding to a loser.
"Buy the dips" is a common phrase investors and traders hear after an asset has declined in price in the short-term.
After an asset's price drops from a higher level, some traders and investors view this as an advantageous time to buy or add to an existing position.
The concept of buying dips is based on the theory of price waves. When an investor buys an asset after a drop, they are buying at a lower price, hoping to profit if the market rebounds.
Buying the dips has several contexts and different odds of working out profitably, depending on the situation.
Some traders say they are "buying the dips" if an asset drops within an otherwise long-term uptrend. They hope the uptrend will resume after the drop.
Others use the phrase when no secular uptrend is present, but they believe an uptrend may occur in the future.
Therefore, they are buying when the price drops in order to profit from some potential future price rise.
If an investor is already long and buys on the dips, they are said to be averaging down, an investing strategy that involves purchasing additional shares after the price has dropped further, resulting in a lower net average price. If, however, dip-buying does not later see an upturn, it is said to be adding to a loser.