Guys like stock_tdr say they've had great success buying dips, but I dont see how they pull it off. LEH has been falling for the past 5 days, even WITH indicators, I still couldn't find a good entry for a long position, and looking at it now, thank god i didnt. I never buy into a position all at once, and I'm having a hard time knowing when to add to positions, and when not too. cm
Instead of being concerned with "indicators", work on a way to define trend-reversal and trend-continuation that you feel comfortable using. If LEH has a higher-daily-low tomorrow, you might want to buy it on Friday.
Don't believe these turkeys... "some" of these guys were just buy and holders and the rest of them were total posers.
Dip buying is what all professionals do, even Japanese housewives! Don't let the naysayers confuse you. Take it from a pro, Naoko Ogawa, a 34-year-old freelance writer: "When the yen rose to a two-week high of 162.20 against the euro on May 25, Naoko Ogawa, a 34-year-old freelance writer, used a 1,000 euro ($1,300) deposit to buy 10,000 euros. She sold four days later, close to a then-record high of 164.29 yen. ``You just need to buy the dollar and the euro on dips, then sell them at a profit,'' said Ogawa, who added that she has made a 20 percent return on her 1 million yen trading account since December. ``It's better than stock trading, as you can rely on daily interest.''" (http://www.bloomberg.com/apps/news?pid=20601087&sid=adnSs4grfQlQ&refer=home)
roflmao You just need to take a scalpel and cut open the body and remove the Cancer. It's so simple anyone can do it ... heck you don't even need the scalpel just use a butter knife.
You have to find a method on where to buy the dips. Many people, as I do, use candlesticks for finding a possible entry point. The closer to the low you can buy (with a good candlestick, and the stock still in an uptrend), the lower the risk if you are wrong. edit: Being close to previous support or resistance is also a great candlestick confirmation.
You may want to focus on a watchlist to play dip buying: - Stock up trending on the weekly - last 2 days closes red and preferably 2 nice long bodies, with close at the low of the day -daily vol above your comfort zone for liquidity( I use 500,000) Now you have a n of stocks in your watchlist, at the open you scan your watch list and you wait for a stock tanking at least -9% on strong volume. I prefer no gap down at the open (max 1-2%) Check quickly whether it's driven by a very bad news(don't touch it) or it's just a possible overeaction. Look at a 5 min chart and wait for a reversal signal. Stop at the low of the day ( a few ticks under) When they work the are good to hold till the end of the day and they often gap up at the open the day after. This was one of my top strategies 3-4 years ago, now it works so so, but a few stocks tend to repeat this pattern often even nowadays(find them). my 2 euro cents
DRC was an example of a good dip. Bought at 38.06 and added again at 39.14. 4 down days, and then it recovered. Buying dips is easy if you know how to scan for stocks.
I only recommend a set of 6-10 stocks which are stocks that keep going higher. Stuff like goog and gs. GS is much better than LEH, meril, or BSC which is why it consistantly makes new highs while ther other investment banking companies faler.