Although some experts believe that prices can be predicted since the market usually follows a repeating up-and-down pattern.
This theory that is yet to be proven emerged as the “buy the dip” technique.
Meanwhile, “buy the dip” simply means purchasing an asset when the price has dropped. Hereunder, people believe that the reduced price can be seen as a bargain as it is known as a “Dip.”
In another instance, “buying the dip” can be seen as the act of purchasing an asset when its price has fallen.
The meaning of “Buying the Dip”
Investors that are interested in buying the dip are people that intend to buy an asset when the price has dropped after a sudden price increase.
The people in this category believe that the sudden price decrease is temporary and will not last for a long period. Perhaps, the dip serves as a great opportunity for them to bargain prices in the market.
Investors who buy the dip are people that are looking forward to creating a giant position in markets; thereby utilizing dips to increase their exposure into those markets.
Anyone who got involved in buying the dip (people that buy the dip) has a goal and this is – for the asset price to go back to its peak wherewith it dropped so that they can meet up with their goal.
The more an investor purchases assets during a dip, the less their average net price in their position is.
Top 10 best times to buy the Dip
Below are the top 10 best times you can buy the dip:
#1. After a 60% drop or more in Bitcoin
As an investor, whenever there is about a 60% drop or more in Bitcoin, it is a strategic moment to buy the dip.
For instance, earlier this year (2022) the price of Bitcoin (BTC) fell below $33,000 for the first time over the 12 consecutive months.
Leveraging in this scenario, ‘buy the dip’ investors can easily detect the perfect time to purchase stocks, being fully aware that the sudden decrease in stock price will be of huge benefit to them.
#2. After a 90% drop or more in altcoins
Since altcoins rely on the price of the cryptocurrency king (Bitcoin) investors should set their goal of buying the dip whenever there is about a 90% drop or more in the price of altcoins.
Although this might seem impossible because of the high percentage that was mentioned.
Moreover, the price decrease in quarter one as of 2022 shows that the possibility of the price of altcoin dropping to about 90% of its initial pricing is quite possible.
For instance, as of June 2022, the price of the most capitalized cryptocurrency dropped below $20,000 for the first time counting from the year 2020.
#3. When we are close to the 200 days week moving average
Another recommended time to buy the dip is when we are approaching the 200-day moving average. The Moving Average (MA) is popularly known as a trading indicator that midpoints valuable information, and it shows up as a line on your diagram.
Because the 200-day moving average serves as a long-term indicator in trading charts, it helps investors to have an insight into the last 200 days of stock price data.
The 200-day moving average indicator enables investors to see buying opportunities as well as selling opportunities.
#4. When crypto Twitter turns bearish
Buying the dip when the crypto Twitter turns bearish is quite advantageous. Moreover, before you venture into buying the dip, ensure that you undergo some research and figure out if the bull market has ended and its predator (the bear market) is on its way.
Professional investors usually buy the dip majorly when they notice a price correction in the bullish market.
Since trends are an advantage in the cryptocurrency market space, buying the dip when the crypto twitter turns bearish can be fantastic.
In most scenarios, the bearish trend can last for some months or just for a few weeks.
#5. When the greed and fear indicator is low
An investor who intends to buy stocks when the prices are low should his investment plan line up with the time when the greed and fear indicator is low.
The scenario of markets pointing either towards the downside or the upside often happens frequently. This is one of the major derivatives of crypto prices.
A professional investor can maximize the greed and fear indicator when buying the dip; as this will be an advantage for him to foresee the extreme ups and downs in crypto prices.
By using the greed and fear indicator, one can easily determine when the crypto prices will be too low or too high coupled with the reasons for that to occur.
#6. When Peter Schiff claim bitcoin’s death
Although the price of Bitcoin dropped drastically because of some economic challenges, professional investors and traders see this as an opportunity to buy the dip.
In as much as Peter Schiff instituted the phrase “Bitcoin is dead,” investors that have been in the cryptomarket for a decade knew that there was a time when Bitcoin was not up to $10,000 but as of late 2021, it rose to over $69,000.
As an investor, you should always follow statistics and trends that are proceeding from the right source. Peter Schiff, the goldbug who began circulating that Bitcoin is dead probably does not own any Bitcoin.
#7. When we retest the ATH of the previous cycle
A professional investor should aim at buying the dip when he retests the ATH of the previous cycle. This is simply following historical analysis when predicting or determining the future price of stocks.
For instance, when investors don’t retest the ATH of the previous cycle in the stock market, it usually affects them.
#8. When the weak hands start to sell
The phrase “weak hands” is used to classify an investor who is afraid especially when he hears detrimental news about stocks.
So when such investors begin to sell their crypto assets, as a professional investor, it is high time for you to buy the dip.
Because these “weak hands” investors tend to follow all the rules that make trading predictable, they normally shake off when stock prices alter.
#9. When diamond hands start to buy
The diamond hand simply means people who prefer to store their crypto until they have gotten all the profits they want.
So whenever diamond hand investors begin to buy the dip, it’s high time to invest in stock as well.
Your primary goal when using this strategy is to buy the dip and not to hold back your purchased stocks until you have seen all the profit you want.
#10. When there is a lot of liquidation on leverage platforms
Liquidations mean that leveraged positions are forced to close due to extreme downward fluctuations in the market. These series of liquidations often result in immediate market crash and offers a good buying opportunity.
Investors can leverage this while buying the dip because many platforms will be affected.
Liquidations on leverage platforms can result in volatile price swings of which professional investors can utilize the opportunity to buy the dip.
As Warren Buffet once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” So, if this opportunity can be grabbed with the right approach, it can turn out to be a once-in-a-lifetime opportunity. (Not financial advice)
Written by: Narender Charan