Buying-the-dips is a simple yet effective automated trading system that can deliver remarkable returns when the market is trending up. Not all price dips are good buy-opportunities, though. The rule filters the best ones.
Sometimes a price drop means that the trend is weakening, and the price may remain low for a longer time. That's not what you may want from a coin you just bought!
How it works
The strategy buys when the coin has a price drop while trading in a larger uptrend.
All you need to do is select the wallet you want to use for buying—for example, a fiat currency, like USD or EUR. Alternatively, a stable coin, like USDT, or you can also trade using BTC.
Pro-tip: the strategy works better when the market's mood is confident and prices are up for a few days.
A multi-level analysis
The strategy measures the drop from two different time perspectives to optimize the time to buy.
The coin is up 3% in 6 hours
The price of that coin dips 1% in 1 hour.
That means that the price drop didn't erase much of the recent uptrend of the coin, and there could still be potential for more upside.
Protect your trades
The bot protects all your trades to reduce the risk of losses and capitalize the profit if the price increases.
The system sells the coin when one of the two following scenarios happen:
the price decreases 3% from the buy price, as a stop loss
the price increases 4% from the buy price, as a take profit.
Backtest the strategy on Tradingview
You can backtest this strategy using this trading script published on Tradingview. You can test the results on historical data, selecting the coin of your choice, and adjusting the parameters to fit even better your needs.
This is a guide to learn how to backtest strategies on Tradingview.