Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Web Trader MT5
All
Buy dips
A strategy, more often a tendency: when an asset you like falls in price, you buy more rather than less. The premise is that the long-term trend is up, the recent fall is noise, and the lower price is an opportunity.
Buy-the-dip works beautifully in a sustained bull market. It produced excellent results for US equity investors from 2009 through 2021, for crypto holders during multiple cycles, for tech-stock holders in the late 1990s; until it didn’t. The problem with the strategy is that it has no built-in stop. Every dip looks the same on the way down. Distinguishing a 10% pullback in an uptrend from the early innings of a 50% drawdown is the entire game, and most retail buyers are bad at it.
The professional version of buy-the-dip uses some combination of trend filters, technical levels, position-sizing rules, and explicit stops. The retail version often doesn’t, which is how dip-buyers turn into bag holders.
Example: S&P 500 dip-buyers had a phenomenal 2020. The COVID crash bottomed in March and the index made new highs by August. The same instinct applied during 2008 produced large drawdowns through November before the eventual March 2009 low. Same strategy. Different regime.
Buy limit order
An order to buy a security at a specified price or lower.
Buy stop order
An order to buy a security at a specified price or higher.
Buy-and-hold
A passive investment strategy where an investor holds a position in hopes to generate a long-term return.
Buybacks
When a corporation repurchases its shares to balance supply and demand, potentially raising stock prices.
CAD
The currency code for the Canadian dollar.
Start trading with A globally leading broker
Want to start trading?
We use cookies to understand how you use our website and to give you the best possible experience. You can find out more by viewing our Cookie Policy.
