Dip Buy
Definition
A dip buy is entering a long position after price has pulled back from a recent high — the goal is getting a better entry price in a stock that's still in an uptrend rather than chasing at the top.
Example
“The stock opened strong with news, ran from $15 to $18.50, then pulled back to $17.20 on light volume. That dip back to the 9 EMA was the dip buy — tighter risk, better price, cleaner setup.”
Detailed Explanation
The logic behind buying dips is compelling: instead of chasing a stock at its peak and having maximum risk with minimum reward, you wait for the natural pullback that happens in virtually every trending move, then enter at a better price with a tighter stop and more room to your target. In a strong uptrend, dips are buying opportunities; the market is essentially offering you a discount on something that's been strong.
The critical skill is distinguishing between a healthy dip and the beginning of a reversal. A healthy dip comes on lower volume than the initial move, respects a logical support level (VWAP, a key moving average, a prior breakout level, a round number), and consolidates in a controlled way before resuming. A dangerous "dip" happens on expanding volume, breaks multiple support levels, and doesn't stabilize — that's not a dip, that's a stock topping out. Buying every pullback without this filter is how traders get chopped up.
Execution matters too. The classic mistake is trying to catch the exact bottom of the dip — buying as the stock is still actively falling. Better to wait for evidence that the selling has exhausted: a bullish candle forming at support, volume contracting at the lows, or a small consolidation at the pullback level before attempting to break back higher. Patience at this stage — waiting for confirmation rather than anticipating — dramatically improves the quality of dip-buy entries.