What is "Buying the Dip?"
The concept of buying the dip revolves around purchasing a stock after its average price has dropped significantly in value. In theory, these investments offer the opportunity to buy stocks at a lower price before riding the wave back to higher share valuations. Such a move allows a trader to sell high or hold assets for long-term growth.
How Does It Work?
The buy the dip strategy works by setting aside funds and searching for a stock or other asset class having a rough stint on their perspective markets. Once an asset drops by a certain amount, long-term investors take advantage of lower prices to buy more than they could before.
What To Look For Before Buying the Dip
There's no exact science to uncovering dips, but there are some signs to watch for before buying. As a stock or other asset trends downward, share prices give way to lower highs and lower lows with each passing day.
Should You Buy The Dip?
Buying the dip is a means of making the most of an ever-changing market. A sense of pride comes with picking up an asset when it's at a low and watching it rise to glory.