A trading strategy where an investor purchases a security after its price has dropped, expecting it to recover. The term 'dip' refers to a temporary decline in price. This approach assumes the price drop is temporary and not a sign of serious problems with the investment.
A stock trading at $100 per share drops to $85 in one week due to general market weakness. An investor believes the decline is temporary and buys shares at $85, hoping to profit when the price recovers. If the stock returns to $100, the investor gains $15 per share.
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