Buying the Dip Explained

"Buying the dip" is a phrase we hear all over the crypto community.  This basic investment strategy doesn't mean going all in when a crypto value is lower than normal, but rather averaging in as it goes down and/or buying after it settles out.  This strategy is much safer to use during a bull market or when the market is stagnant.  This is because the general trend is either going to continue up or sideways.  During a bear market, the general price trend is down and will most-likely continue to fall.

There's a few ways to include yourself in buying the dip alongside the rest of the market.  You can buy incrementally as the price goes down, creating an average position and setting your aim to buy more as (or if) the price decreases further.  You can wait until the price settles and, perhaps, show signs of recovering... buying at that point.  You can also set your buy orders at lower prices and let them fill over time.  Setting buys just before historic support levels, large "buy walls", and psychological levels is an especially good strategy.  Prices will tend to do at least a quick bounce off of these levels and there should be a decent margin for profit.

This takes patience, but can reap great rewards if you play your cards right.  Taking a look into the history of the value of your assets can give you an estimate on how the market will be reacting in the future.  This is always a risk as the crypto market is highly volatile.  Although volatile, it's always good to keep an eye out on when the market dipped, why it dipped, and how it recovered afterwards.

I am not sponsored by anyone or anything mentioned in this article. 

This is not financial advice.  I am not a financial advisor.

Please do your own research before making any decisions before investing. 

This article is meant for educational purposes only.

The infamous candlestick chart.  You can utilize this chart and diagram above (sorry about the jpeg) to figure out when support levels are typically reached and where the asset will be moving forward.  It's not as bad as it seems, as figuring out resistance and support levels is one of the many basic tools you will need to be successful in your crypto trading adventures.

Resistance levels are at the top of the chart.  These indicate where the asset met price resistance and no orders were placed at a higher level at the time.  When resistance is met, the asset will typically begin to decrease in value.  This is due to FOMO, panic-selling, FUD, you name it.  It's not clear as to why this happens exactly, but a combination of those factors play a big part in selling-off crypto.

Support levels are towards the bottom of the chart.  This is the lowest point the asset reached before the market began an upward trend again.  This is where buying the dip comes into play.  Buying the dip is generally always met at the support level.  The more-experienced investors have been waiting for this point to make their major investments and take the dive.  Neither resistance or support levels are fixed break-points nor do they guarantee a reversal in the trend.  As mentioned previously, the crypto market is highly volatile and should be approached with caution at all times.

It's always important to watch out for a support level or resistance level break.  When the support level breaks, it's an indication that there aren't any buyers left who find the entry price attractive.  A break in the resistance level indicates that the demand has increased, allowing sellers to raise the price of their assets to new, higher levels.  These changes in levels are a form of typical market correction and can assist investors when determining the [new] trend of the market.

Resistance levels and support levels are powerful tools to have in your toolbelt when you are investing in any asset.  When used correctly, it's a great way for traders to position themselves in the best possible entry and exit prices.  Although great, there are many other tools that can be utilized to analyze price charts.  Once you find the best method of research that works for you, the sky is the limit!  Hopefully this article can help you understand when to "buy the dip" more confidently, but don't just listen to me!  It's always very important to do your own research prior to making any sort of decision!

What are your favorite tools to read price sheets?

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