WorldExecutivesDigest.com | Dip and Rip Stock Trading Pattern: 5 Key Points to Remember | Buy low and sell high. Everybody has heard that one. But, when it comes to when this strategy is possible, the situations are few and far between. To many experts, the solution is a strategy called “dip and rip” or to buy when a stock price is down and sell just as it starts to increase.
Day traders thrive on volatility. Unfortunately, this is often what causes them to make money or lose it. There is no middle game, no time to let the stock price grow since they have bought and sold in such a short period. This is where software from TradeZero comes in.
Taking a Long Look at Dip Stocks
There are many trading strategies available, each viable to a greater or lesser extent. Dip trading, however, is only feasible in day trading since traders watch the stock prices so closely.
Day traders attempt to profit by watching stocks closely so that, when their prices fall to what they believe are their lowest levels, they buy. Then, they wait until stock prices increase to a level they believe will settle, then they sell.
This is when to “dip and rip” comes into play. To “dip” means the point at which a stock price reaches what a trader believes is its lowest point. That’s when to buy. To “rip,” by contrast, means to wait until the price of a stock starts increasing, even by just a tiny margin, and “rip,” or to sell. To dip and rip isn’t for everyone, but in theory, it works. To have this methodology pay off depends on a few things to remember.
5 Key Points to Remember About Dip and Rip
Point 1: How Does a Trader Know when to Dip or Rip?
They don’t. This is, at best, a theoretical concept. At what point a trader dips or rips is based on their nerves and knowledge of the stock.
Point 2: So, when to Dip or Rip is just a hunch, right?
Yes and no. When to dip or rip is no more a hunch than when to buy or sell any other stock.
In this case, the difference is when day traders use this method to gain small profits over a short term of price increases. As a result, the profit from a trade might be smaller than those that would be gained in the long term, but it’s still a profit.
Point 3: Is Dip and Rip Not a Feasible Strategy for Long-Term Traders?
Again, yes and no. In its most basic form, dip and rip is just buy low and sell high over the longer term. Dip and rip is buying low and selling high, only in the short term.
Point 4: Dip and Rip Comes Down to Bears and Bulls
Stock trading comes down to the on-going battle between bears and bulls, predicting highs and lows based on hunches and knowledge of the stocks and surrounding market indicators.
Point 5: Dip and Rip Works
Regardless of the market strategy used, nearly all systems work in one economy or another. What matters most is what a trader’s tolerance to risk and volatility is. When used correctly, dip and rip does work for the consistent trader.
One Last Thought
A trader who consistently watches for dips in stock prices is in a better position to either buy or sell when the market is rising overall. Buying a stock before the price increases means better protecting your investment in whatever category of stock you select for investing.