Buy The Dips

AAA

DEFINITION of 'Buy The Dips'

A slang phrase regarding the practice of purchasing stocks following a decline in prices. After a significant dip in the price of a security or stock index, investors should increase positions or purchase different stocks to capitalize on what is seen as an eventual upswing.

INVESTOPEDIA EXPLAINS 'Buy The Dips'

The concept of buying dips is based on market fluctuation. Because the market is volatile, any given dip in prices should eventually rise back up. By purchasing stocks right after a dip, investors are essentially buying shares at a discounted sale price.

Like all trading strategies, buying the dips is not a sure thing, because some stock price drops are due to negative changes in the underlying company's fundamentals. For example, investors who followed this strategy around the bursting of the dotcom bubble may have lost a lot of money because many internet companies lacked a proper revenue-generating business model.

RELATED TERMS
  1. Crash

    A sudden and significant decline in the value of a market. A ...
  2. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  3. Bubble

    1. An economic cycle characterized by rapid expansion followed ...
  4. Dotcom

    A company that embraces the internet as the key component in ...
  5. Market Swoon

    A slang term for a decline in the overall value of the stock ...
  6. Commercial Real Estate Loan

    definition of a commercial real estate loan
Related Articles
  1. Understanding Investor Behavior
    Active Trading Fundamentals

    Understanding Investor Behavior

  2. The Ups And Downs Of Investing In Cyclical ...
    Investing

    The Ups And Downs Of Investing In Cyclical ...

  3. Dollar-Cost Averaging Pays
    Retirement

    Dollar-Cost Averaging Pays

  4. The Greatest Market Crashes
    Budgeting

    The Greatest Market Crashes

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center