So even in normal circumstances, recognising a dip is challenging. In theory, any value below that would be an opportunity to buy.īut, in any market conditions, it is difficult to find the actual value of a company. With proper research and enough time, it may be possible to determine the actual value. A dip would be a low point where one expects the security price to rise. The first step in ‘buying the dip’ would be to recognise the dip. predicting the timing of a market’s rise and fall, as foolish. In the words of Peter Lynch, “The only problem with market timing is getting the timing right.”Įxperienced investors think of timing the market, i.e.

It is simply not possible to time the market. There are two major problems with ‘buying the dip’: 1. So for this trade, we lose ₹ 7.25 per share. However, Spicejet has been falling since we bought it and currently () stands at ₹ 63.50. If Spicejet had recovered to ₹ 80, we would have made ₹ 7.25 for every share we bought. We hoped to make profits when Spicejet recovers. This looked like a dip from the previous week when the price was in the 80s or high 70s. Suppose on 29th November, we bought Spicejet shares for ₹ 70.75. But, as we will see, it is a very risky strategy.

So an investor’s urge to try and ‘time the market highs and lows’ is understandable. It makes mathematical sense as well! There are many dips to buy and many peaks to sell in a volatile market. Buy at the lowest of lows, and you are always making a profit. Buy the dipīuying the dip is something you’ll hear from almost every YouTube finance influencer claiming to do in a crisis. So while dodging panic trades and resolving to take some losses and move on is the correct answer, the actual process that leads to it is hard to find. Investors find that their temperament is tested more than their intelligence. Volatile markets are problematic because it is challenging to know the value of any security. They are characterised by wide price fluctuations and high trading volumes. Volatile markets are panic-inducing, create uncertainty and are sadly inevitable. Hence, a rise in NIFTY VIX would indicate a rise in volatility.Ī market-wide rise in volatility means a lack of safe investment options. It tracks the expected volatility for the next 30 calendar days. NSE has a volatility index called India VIX or NIFTY VIX.

Sip dip