Do Not Buy The Dip!
Not all dips are created equal…
Published in
4 min readJun 12, 2022
BTFD was the rallying cry of the class of ‘21…
“Buy the fucking dip”
This is what happens in a bull market when everyone is an investing genius.
But when we enter a downtrend it’s a great way to get financially rekd.
Lower Average
If you’re buying dips aggressively at the top of a downtrend, you’re likely to run out of funds at 50% down or so.
Out of the 18 dips on the above chart, if you managed to buy the first 12 before running out of capital, your average price would be around $48k.
This happens to be the exact 50% level between the top and bottom.
Problems:
- Your average price is now relatively high
- Your position is sitting at a significant unrealized loss
- You may have no more, or limited funds to invest
