Where Do You Buy Back In?

Should you be buying this dip? Or waiting for the price to go lower? 

If you don’t know the answer to that question, then it’s very likely that you’ll make an emotional decision and “chase” the market higher, accomplishing nothing but FOMO’ing in yet again.

And worse yet, you might delegate this decision to someone or something else, such as asking a discord group or subreddit what you should do. That automatically makes you part of the “Herd” and will almost guarantee a bad decision. 

Before we get into this, understand one very important thing: You will NOT get the bottom tick of whatever coin that you want to buy. It’s simply impossible to score the bottom, there is no indicator known in the trading universe that will signal a “bottom.” All you care about is having a shot to get an entry that just might lead to higher prices down the road. 

Let’s look at a couple of different ways to come up with a defined, objective approach to determining a good “buy point.” 

Dollar Cost Averaging – Two Ways to DCA

We can Dollar-Cost Average several different ways; let’s discuss a couple of them: 

TIME – the most popular method is to DCA by time. Every XX days, you invest a specific dollar amount into the coin of your choice. The best way to accomplish this is to use the automated tools that most fiat brokers offer; they WANT you to increase your stake on a continued basis. There is absolutely no accommodation for trend nor price action; this is investing purely on the basis of time. 

TECHNICAL – you can program deposits to occur when specific technical signals show an “oversold” condition. Understand that this is no guarantee that you will buy “THE” low, however it might be a RELATIVE low. 

The comparison between these two methods will depend on when/how you start this process. The technical method might have an advantage over the time method if you start this during a primary downtrend, however the “time” method will certainly have an advantage over technical during a primary uptrend. 

Technical Price Action

Something that I repeat over and over again is that I want to “buy assets that are increasing in price.” What is “low” and “cheap” can become “lower” and “cheaper.” Those that bought the dip of BTC in December 2021 are regretting that they bought at $50k. 

I will be more aggressive to “buy the dip” if some of the larger timeframe charts are showing a primary uptrend, such as the Weekly chart. If we truly have a weekly uptrend, then there are several tools that we can use to insert ourselves into a trend. 

But the problem these days is finding an entry point into an upside swing. We will never know whether that swing will “become something” someday, so we should treat every entry as a “trade” that we will sell into strength for now. Once the larger weekly swings start, then we can look to accumulate and hold. 

Here are a couple simple tools to help find an entry into an ascending market: 

The 200 DMA

The 200 Daily Moving Average is a good trend filter that can be considered the “mean” of the price action. Price above the 200 dma shows a general uptrend. Below the 200 shows a general downtrend. There will be exceptions, of course, and there might be plenty of “up” while the price is below the 200…however we do want to wait until the price starts trending higher, and CONTINUES that trend. 

Donchian Channels

This is what we call “trend trading” by waiting for breakout from specific base levels. You can see this with the signals supplied by the RSC Trend Trading study through the Donchians: 

Note how we also wait for the price to be above the 200dma (green) before we fire off the Trend Trading logic. If you want to know more about this specific technique, view the “trend trading” masterclass in our archives.