- Buying the dip is an investment strategy in crypto-currencies that involves purchasing an asset when the price of the asset has gone down below the average.
- Investors looking to buy the dip may do so to build long-term positions or sell quickly to scalp their profits.
- In crypto-currencies, there are two kinds of dips – the little dips and the big dip called correction or crashes.
Buying the dip is a crypto strategy that simply means buying an asset as the price goes down. Investors looking to buy the dip may do so with the intent of building long-term positions or just in order to quickly sell off to scalp a profit.
Buying the dip has become increasingly popular following Bitcoin’s latest price crash that saw its price fall by over 17% within 7 days. If you’re looking to learn how to buy the dip, here’s how to go about it.
The Intricacies About Buying The Dip From Experts
Buying the dip as an investment strategy in cryptocurrencies is a pretty solid plan if you’re looking to increase your trading funds or generally try to eke out a profit from the market.
Buying the dip could mean buying in bits while the price goes down intending to increase the volume of your portfolio with every price slump. Alternatively, investors may patiently wait till the price crash is over and begin buying as soon as the market shows signs of an upward trajectory.
Furthermore, cryptocurrency traders looking to buy the dip may set automatic buy orders at well-known support levels because at those levels the prices are likely to bounce off from there.
In its simplest form, this strategy of buying low and selling high, and in its complex form, involves paying keen attention to the charts, understanding moving averages – long and short term, looking out for historic support levels, and placing stop losses.
Whatever your strategy or tactic is, it ultimately boils down to buying low and selling high. However, if your strategy involves range trading, you’ll be better off buying little dips but if long-term investing is your forte, then you should strive to purchase the big dips or price corrections. The key is to get the timing right on your purchases in order to be a profitable trader.
On The Flipside
Should you Buy The Dip?
Buying the dip isn’t without its risks and getting the timing wrong may be catastrophic for investors. In order to successfully buy the dip, investors must conquer the impulse that comes when everyone else is buying high and also resist the temptations to sell during a price correction.
In addition to that, investors should arm themselves with the knowledge of whether the general market trend is bullish or bearish. This is because bearish markets are not profitable to investors whose strategy is to buy the dip. You may use technical analysis like the MACD tool to be sure of the status of the markets.
Knowledge of the reason for the dip is also important to be profitable with this strategy. You can understand the reason for the dip by listening to the news. A rule of thumb is that bad news causes the price to slump further while good news generates a price rally.
In 2015 and 2018, investors who bought the dip amidst Bitcoin’s falling prices gained a great percentage as bitcoin quickly rallied and gained over 60% of its value.