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“Buy the dip”, but what is “the dip”?

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    • #690
      Crypto Link

      “Buy the dip” is a common adage known in the cryptocurrency; you want to buy the dip because there is more profit potential when you purchase an asset at a lower price to sell at a higher price; however, the question still remains, what is the dip?

      In wake of the recent four month move from 60,000 to 40,000 we have been given a clue to learn what the dip really is. If you go to your preferred software that quotes prices of your preferred cryptocurrency, change the timeframes: from yearly, to monthly, to weekly, to daily, to hourly, and by the minute. No seriously, go do it! Do you notice that even though on the minute there are dips, sometimes the hourly chart hasn’t dipped any? Do you notice that there are dips on the hourly chart that have little to no manifestation on the daily? Yes the daily may dip for one, two, -at most- three bars; however, it still continues its up move.

      Now, look at the daily chart; notice there are dips on the daily; however, some of these dips show on the weekly chart; however, some of them do not. One point of interest is from the fourth of January 2021 until the 25th of January. On the daily – not to mention the hourly, this was the end of the world; the price was plummeting, and there was no hope of salvation; however, a sleuthy study will lend itself well to you. Take a look at the weekly chart of that same timeframe; how much of a dip was there: none. Right! There wasn’t a dip at all! The price didn’t break the low of the week of January fourth. The next three weeks of dips on the daily chart were still contained within the last up bar of the weekly.

      Let us take it one step further. Take a look at the monthly chart of that same timeframe; where is the dip: nowhere? Right! There is no dip at all! No bar went further down – was lower – than the last bar.

      To conclude, what is the dip? The dip is relative and specific to your timeframe; for a day trader who uses 10x leverage, even a minor 6% dip from 57 thousand to 54 thousand is major; however, to a participant in the marketplace with a longer time horizon, that dip may be meaningless. Moreover, a dip on the weekly chart from 60 thousand to 40 thousand may be the end of the world for many people; however, to a market participant who has an even longer time horizon, that dip still is meaningless.

      To know what the dip is, you must know what time horizon you are a market participant of, and when you know that, you are one step ahead of where you were before, and that’s all you can ask of yourself, isn’t it: to be one step ahead of where you were before?

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