The Trader's Mindset - MVHQ

The Trader's Mindset

The Simplicity of Buying the Dip

Feb 22, 2024
General Strategy
The Trader's Mindset

Let me start by saying, the purpose of this field report is to help the type of trader who can’t get enough action; the type of trader who is out of one trade and into the next. By no means do I consider myself a great trader, as a matter of fact, I struggle often with fomo-ing into projects, coins, etc. Consider this field report a public journal entry where I will talk about my bad trading habits and how I’ve been working to counteract them.


If you are like me, you dream of quick cash. You see a call out in VC and think “oh man I’ve been waiting all day, I better get in.” You pull up the chart of “lil swag world” or whatever project you’re queuing up a buy for, and notice that it is 40% in the last 20 minutes. You think “I probably shouldn’t”, but as you watch the sales of swag world pour in, you are convinced this one could be the next big thing and rush in.


If the above thought process sounds familiar, then consider yourself a member of the not-so-exclusive fomo club. It’s common to be a member of the club because fomo is an emotional response. As human beings it’s natural for us to feel excited, or scared, or whatever else while trading. However, as traders our jobs should be to eliminate emotions and root our trades in risk and reward (highly recommend checking out Lizard Capital’s field reports for more info on this).


One tactic that has helped me start shifting to a risk reward mind-set is already trivialized in trading culture. BTFD. Buy the fucking dip. It sounds so simple, but truly, it can be a fantastic strategy to start becoming a less emotional trader. While some people might consider this trying to “catch a falling knife” I consider the dip buy to be an art form of finding a better entry.


Think about it, how many times have you seen a shit coin or brand new NFT double in price before you decided to get in? Of those entries, how many continued to rip up, and how many fell 20% right from your entry? While I’m aware that there are projects that come up and go straight up 1000%, those are usually preempted by a new meta, or have some deeply rooted hype mechanisms to allow them to do so, it is certainly not the norm.


Now I’m not saying to exclusively buy dips, but if you find yourself about to buy the top of a chart, stop and ask yourself, what is my expectation for the price from here? Is this project actually capable of giving me a quick 2x from my entry, or is more likely to pull back first? By simply asking ourselves these questions, we are one step closer to ending the cycle of fomo.


The beauty of waiting to buy the dip, is that if you are patient, you are guaranteed to have a better entry than at least some other traders. The same cannot be said if you buy the top unless the price goes straight up from your entry.


One key for buying the dip is finding quality. I never buy dips on projects that I’m unsure of their short term longevity (mainly micro-cap shit coins). I feel great buying dips on coins such as BTC or Sol, as well as projects that I believe in long term and have established communities. Personally, I would feel more comfortable buying a project at a higher price point on a pullback, than at a lower price point but at the top of a huge green candle.


For me, the best way to go about buying the dip is to enter with about 25% position sizing, and if the price continues to drop I will add to the position as the price falls (usually I add a bit more for every 10% the price drops).


Welp that’s pretty much it. As I said, this report really is more of a journal entry than anything, but seriously, I have found great value to my trading by working towards a dip buying mentality. If you are usually a fast paced trader and have found yourself getting burned lately, I would strongly suggest giving the dip buy a try and seeing if it helps. At the very least, this thought process should help slow your trades and give you better quality entries. Happy Trading!