How to buy the dip for fundamentally good stocks? (Bollinger Bands)

Many people heard of this advice "Buy low, sell high", but how exactly do we achieve that?[疑問] 

This post is for long-term investors who believe in DCA(Dollar-Cost Averaging).[開心] 

Fundamentals and Trend

First, the stock we pick has to be a fundamentally good company and be on an uptrend from a long-term perspective. Information such as profitability, revenue, assets, liabilities, and growth potential are considered fundamentals.

Example of a downtrend(Ref: $Robinhood Markets, Inc.(HOOD)$):

Avoid stocks constantly making new ATL(All-Time Low)/52wk Low

Example of an uptrend(Ref: $英偉達(NVDA)$):

Look for stocks that have been making new ATH(All-Time High)/52wk High

Be Patient with Price Movement

Next, we have to be patient and wait. There are many different indicators available and used by different people. The indicator I use to determine the low is called the Bollinger Bands. To put it simply, when the underlying price exceeds the upper limit, it is overbought, and when the underlying price exceeds the lower limit, it is oversold. You might have guessed it, we should wait for the price to be below the lower limit to average in.

As we see here, there are many opportunities to buy the dip

We do not need to add in every time, but when we do plan to average in we can always wait for the price to come down to the lower limit.[正經] (Ref: $納指三倍做多ETF(TQQQ)$)

We can easily add the Bollinger Bands indicator in the Tiger App Charts

Note that this does not guarantee to buy at the low every single time. However, by DCA, we can achieve a decent low cost price for a long-term stock we believe in fundamentally.[哇塞] 

Market Psychology behind Price Movement

Indicators can be awesome for buy/sell signals. Nevertheless, we should try to understand the rationale behind the move. I will use $納指ETF(QQQ)$ as an example for this explanation.[可愛] 

In general, when the price breaks a recent low, it is a bearish sign and there will be shorts entering in hope for another leg downwards. When the penetration of the previous low failed to hold, the shorts who entered will look to get out of the trade.[驚嚇]  This causes a reversal and a directional move up. We can see a beautiful reversal from the low and now near previous resistance. If it breaks over this resistance, we can potentially see a retest of ATH. A rejection might cause the price to come back down or move sideways.

Conclusion

A fundamentally good stock can be on an uptrend in the long term and trading sideways or on a downtrend in the short term. We can use Bollinger Bands to help us DCA into the stock. Of course, this is just one of the many methods out there, but I hope this will help you in your investment journey.[保佑] Merry Christmas and wish you success![勝利] 

Disclaimer: The method mentioned is my own opinion and not investment advice. If you choose to follow the method, do note that you are responsible for your own money. Prioritise your own risk management, expel emotions & focus on your investment plan.[暗中觀察] @TigerStars 

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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  • MengKeng
    ·2021-12-28
    buy low, sell high is definitely not easy.  Being patient and not panic is also key in it.  let's all learn and earn big money together
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    • TigerOptions
      let's get the money! [Miser]
      2021-12-28
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  • JPStudio
    ·2021-12-28
    thanks. I like it when u add Tiger app screenshot to illustrate how to add the Bollinger Band.
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    • Guardian_JReplying toTigerOptions
      great
      2021-12-30
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    • TigerOptions
      glad you like it, my goal is to make it simple for beginners to understand [Grin]
      2021-12-29
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  • FannyNg
    ·2021-12-28
    Long term investment in a fundamentally good stock takes patience and good timing. Buy the dip.
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  • Ting2163
    ·2021-12-29
    Hi JayceLee, thanks for the information. It help me to understand better and another way to trade or invest.
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    • TigerOptions
      Glad I helped you [ShakeHands]
      2021-12-29
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  • Waves
    ·2021-12-28
    what setting will you recommend for the bollinger band?
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    • TigerOptions
      I use default settings [Silence]
      2021-12-28
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  • SheperdBoy
    ·2021-12-28
    Thanks for sharing! Bollinger bands a good strategy for DCA Entry.
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    • TigerOptions
      glad you agree [Happy]
      2021-12-28
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  • ThunderPat
    ·2021-12-27
    Thanks, it seems to be a wise strategy
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    • TigerOptions
      Hope this helps you
      2021-12-28
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  • Hold or sell
    ·2021-12-27
    Thank you for sharing
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    • TigerOptions
      Hope it helps you
      2021-12-28
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    • Ytyt
      yup
      2021-12-27
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  • Sofia2018
    ·2021-12-27

    Good article

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  • ATH
    ·2021-12-27
    thanks for sharing
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    • TigerOptions
      glad you like it [ShakeHands]
      2021-12-27
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  • nctony
    ·2021-12-28
    not easy to buy low and sell high [Duh]
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    • TigerOptions
      Nothing is easy in the stock market, wish you success! [Victory]
      2021-12-28
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  • KYHBKO
    ·2021-12-27
    use of Bollinger bands for DCA. good sharing
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  • Kel9670ong
    ·2021-12-27
    A good read and analysis
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  • MaShao
    ·2021-12-27
    thanks for sharing... I shall head towards your advice
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    • MaShaoReplying toTigerOptions
      thanks for the advice, I am still new hence wouldn't dare to head blindly [Cool]
      2021-12-28
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    • TigerOptions
      if you agree with me feel free to do the same, but make sure you're not just blindly following [Smart]
      2021-12-28
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  • tobe.....
    ·2021-12-27
    thanks for mentoring my tiger's journey [Heart]
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    • TigerOptions
      I'm honoured and humbled [shy]
      2021-12-28
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  • SBPang
    ·2021-12-27
    good info,easy understand
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  • LawrenceSG
    ·2021-12-27
    Great ariticle, would you like to share it?
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  • Newbull
    ·2021-12-27
    interesting article.....DCA indeed a great approach as long as u r investing long term.
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    • TigerOptions
      Indeed, it's something I use so decided to share this [Victory]
      2021-12-28
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  • fatz
    ·2021-12-27
    Great ariticle, would you like to share it?
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  • Magus007
    ·2022-01-11
    I found it. TradingView.com
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    • TigerOptions
      yes you're right [Like]
      2022-01-12
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