“This time, it’s different.”
“Buy low, sell high.”
“To the moon🚀”
“I’m waiting for the pullback.”
These are among the commonest phrases you might come across among investors who have just bought the dip.
What happens now that you have bought the dip, and it keeps dipping? What should you have watched out for before buying it? Is buying the dip an effective trading strategy?
Let’s get to it!
“Buy the dip” is an investment strategy that follows the logical principle of “buy low, sell high”. It involves buying assets when their prices drop, believing that the market will rebound upward and good profit would be made.
Essentially, every time a stock or crypto dips, it provides investors with an opportunity to buy at lower prices, increasing their potential profitability. And although “buy the dip” has become a household name in the world of Memes, it is still a market timing strategy that many short-term investors rely on.
What then should you note before buying the dip?
1. Asset performance
Although price is not always a perfect market indicator, knowing how an asset performed in previous bear markets or “dip” is key to understanding if they would be a great choice to invest in when there is a dip. For example, because Usain Bolt won gold medals in athletics at the 2008 Olympics, you might want to believe that he would at least make a podium finish at the 2012 Olympics. Why? Because there is proof of distinct performance.
Before buying that dip, understand the peculiarities and general performance of the stock.
Using proven indicators, you can always analyze and assess the performance of your desired assets.
2. Risk control
“Buying the dip” is a trading strategy that is dependent on market prediction. Since predictions (like Octopus Paul) may sometimes go wrong, managing risk is always right. Before buying the dip, put measures to manage risk, e.g. stop-loss orders or spreading capital across multiple assets.
When you place a stop-loss order, it ensures that you exit specific trades if a certain amount of money is lost ( limiting losses), and if you spread capital across multiple assets, it limits how much can be lost from one asset.
Overall, risk control before buying the dip is vital to prevent losing your portfolio in one night.
3. Dollar-cost average
Dollar-cost averaging is an investment strategy where an investor buys the same amount of an asset within a regular time interval, irrespective of the cost. For example, buying $5 work of Bitcoins every week for 2 years is dollar-cost averaging.
At Accrue, we employ dollar-cost averaging because it ensures that the investors buy the shares at the most average price (in and out of the dip), thereby lowering their risks and ensuring their profits are likelier.
This simple, yet effective strategy on the Accrue app eliminates the stress of timing the market, shifts the psychological burden from you and makes investment as simple as pronouncing “Accrue”.
Fun fact: If you bought $1 worth of Bitcoin everyday, starting 3 years ago you would have invested $1,097, the current value of your investment will be $3,531 - you would have made 222% profit.
Accrue automates the process for you so you don’t have to do it yourself. All you have to do is deposit - we do the hard work.
In summary, everyday is a good day to invest in solid assets. Whether the market is bullish or is bearish, you can always build that financially fulfilled future for yourself.
Before you buy the dip, follow our tips. 😉
We enjoy hearing from you. Kindly share your past experiences about buying the dip - with your permission, your story might even get featured.