GLOSSARY // Day Trading
Dip Buy
A dip buy is a long entry into a pullback within a stock that is trending up, rather than a chase of the highs. The dip buyer wants strength on sale: a momentum name that ran from $5 to $7 and has pulled back to $6.40 at a logical support — VWAP, a prior breakout level, a round number.
What separates a dip buy from catching a falling knife is context. Buying a pullback in an uptrending stock with a live catalyst and holding volume is a defined-risk trade; buying a stock in freefall because it is down a lot is not a dip buy, it is hope. The entry needs a reason the selling should stop there and a stop-loss just below it.
A stock runs from $4.80 to $6.90 in the first hour on 10x normal volume, then pulls back to $6.15, right at VWAP and the prior breakout shelf. A trader buys 800 shares at $6.20 with a stop at $5.94 — $208 of risk. The uptrend resumes and the trader scales out between $6.80 and $7.10.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.