Buy the Dip

Buy the Dip refers to a trading strategy where investors purchase an Asset after a temporary decline in its price, with the expectation that the Asset will recover and increase in value over time.

This approach is based on the belief that market fluctuations are often short-term and that buying during a dip provides an opportunity to acquire the Asset at a lower price.

Examples:

• A Stock that regularly trades at $100 experiences a drop to $90 due to a market correction. An investor buys Shares at $90, anticipating that the Stock will rebound to its previous value or higher.
• A Cryptocurrency, such as Bitcoin, falls from $50,000 to $40,000 after negative news. A trader might buy at $40,000, believing that Bitcoin will recover once Market Sentiment improves.

Cases:

• During the COVID-19 pandemic, many tech Stocks experienced sharp declines. Investors who “bought the dip” during these downturns often saw significant gains as the market recovered.
• In early 2020, oil prices crashed due to decreased demand. Investors who bought oil Stocks during this dip benefited as prices and demand rebounded in subsequent months.