“Buy dips” is a forex trading strategy that involves buying a currency pair when its price dips or retraces from a recent high. The idea behind this strategy is that traders can enter a long position at a better price than the recent high, potentially maximizing their profits when the pair’s price bounces back.
For instance, let’s say a trader identifies a currency pair that has been on an uptrend and reaches a recent high of 1.5000. If the price of the pair subsequently dips to 1.4500, the trader might see this as an opportunity to buy the pair at a discounted price. If the pair’s price then increases to 1.5500, the trader could sell the pair and potentially realize a profit.
Traders who use the “buy dips” strategy often use technical analysis tools, such as support and resistance levels or moving averages, to identify potential entry points for buying a currency pair. It’s worth noting that this strategy can involve risk, as the price of a currency pair can continue to fall after a dip, potentially leading to a loss. Therefore, proper risk management is crucial when using this strategy.