Buying the dips is a strategy used to purchase the stock you want at a better or cheaper price. When you find a stock you like you should begin to follow and chart the stock. Nothing moves straight up and even if your stock is moving upwards it will have a couple days of down prices before continuing its trend upward. Perfect timing when “buying the dips” would be to catch the stock on a pullback to a recent support area and then pick up the stock. You will be at an area of support and hopefully the support will hold and bring the price higher, in this case you will immediately have a green trade. Some traders use the buy the dip strategy to increase their position in a stock as well. Day traders will use this strategy for intraday trades where they look to pick up a gain by scalping.

With all stock trading this strategy will not always work. You could buy the dip on a stock as its beginning a down trend. You may buy the wrong stock all together. Either way, by paying close attention to prices and charting the stock. Your entry should be cheaper therefore even if the stock becomes negative you will have lost less money.

This is the true way to buy the dips. It is very different from buying the bottom. Although some traders use the 2 terms interchangeably, buying the bottom is when a stock is doing badly and losing value constantly. At some point even though the stock is on a negative trend the price per share becomes good value based on the worth of the company. A lot of our stock picks on this site are “bottom picks” when we feel a stock will slowly begin to work its way to a better price. Our most recent bottom pick was Nokia NOK. Currently it is still at a bottom and a loss from our position. Down here it is trading sideways though and at times we are in the green. The expectation is for this stock to become a positive trending stock and give us a 100% gain which is what we always shoot for.

• Previous Entry: Twenty Huge Investment Mistakes
• Next Entry: Buying Stocks on Margin