Investors Should Adopt Buy On Dips Strategy
Thursday, October 29, 2009 9:28Recently, I’ve come across a good investment strategy which is “buy on dips”. Buy on dips is very popular technique of making money among the stock market investors. If you ever watch business channels, the technical analysts there keep on suggesting to buy stocks on dips and if you follow their words correctly, nobody can stop you from making more money than you would without their advises.
The basic idea behind buying on dips is to accumulate a certain stock you are interested in at a time when it has already fallen to a level from where there will less likely be a fall. Ofcourse the stock may still fall a bit but then it will bounce back immediately from there as the market goes up making you gains. Also by this strategy, you get a chance to get entry into a stock at a lower level thus maximizing your gains from that certain stock.
What a lot of new investors do is buy the stock when its constantly going up and then they end up buying the stock at a peak from where it falls giving them a loss and thus creates a panic in them. Often at this step they get upset and sell off that stock thinking their investment was horrible and the company has no potential at all. The common thing among every stock is they always rally up along with the market and once the correction in that stock or the market itself comes, the stocks fall down to certain extent, where it consilidates and again with the market goes up. It is at this post correction phase that you have to accumulate the stock from where the only way is up (unless the market sees an unexpected dip).
I would suggest to monitor the stock for a certain time. Have a look at the weekly and monthly graph for that stock (try money.rediff.com) and see if the stock has only rallied up or even corrected. See what the technical analysts are talking about the stock (try moneycontrol.com). And if the stock has only rallied up, then wait for a correction in the stock and then enter it.
I would say that every stock that I bought into at a peaks have only given me a loss and every company that I entered at post correction phase which is the consolidation phase has only given me profit. So I am sticking with the buy on dips strategy. Are you?
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Ajith Edassery says:
November 14th, 2009 at 4:31 am
You are right about the strategy. Bharti below 295 is a good buy at the moment though most of the telecom stocks are kind stagnated. I would buy Sesa Goa on the next dip.
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Mayank Reply:
July 31st, 2010 at 11:35 pm
It seemed to not work out. Bharti is still stuck close to those levels. I guess it shall take a lot more time to recover!
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Tech Maish says:
January 16th, 2010 at 7:23 am
I am still confused.
What is exactly “Buy on Dips”
Is it means that investor has to buy when the price is low.
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Mayank Reply:
July 31st, 2010 at 11:35 pm
In short I’ll try to explain. Maintain a watchlist. Suppose you are interested in investing in a company, say Tata Motors. You see its priced 850 per share now. You do a small research on its share prices lately. You see that it is almost in his highs as of now, means the stock is high priced and it hasnt dipped. Now keep monitoring it, maybe market falls or some bad news comes and stock keeps falling, say it went down to 700. Now you see 150 rupees fall is really interesting, you enter the script and hold. Wait for some change of events, stock is back to 850, sell it and make profits.
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Avadhesh says:
January 27th, 2010 at 7:20 am
Yes this is good idea, we are also doing this Investment and saving the money but I agree with your advise.
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Mayank Reply:
July 31st, 2010 at 11:33 pm
Great! good luck
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chauhan says:
February 13th, 2010 at 6:52 am
nice blog on the selected topic.i m totally agree with this post thanks
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Sasha the Money Multiplier Girl says:
August 23rd, 2010 at 4:55 pm
Sweet, that’s precisely what I was hunting for! You just saved me alot of digging around
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Jacquie Arner says:
August 23rd, 2010 at 11:04 pm
Thanks for the tip!
I am going to add your blog to my list!
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August 24th, 2010 at 2:10 pm
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August 25th, 2010 at 7:53 pm
Thanx for this, I guess I’ll have to rethink my perspective after all these years.
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