So you've been taught to "buy the dip”.

It's like the holy grail of trading advice. Everyone and their grandmother says it.

"Wait for a pullback because it's safer," they said.

"Be patient and let the market come to you," they said.

So there you are, sitting like a monk meditating on Mount Patience, waiting for that perfect dip.

Finally! Your patience paid off. The market made a pullback, and you swooped in like a hawk catching its prey.

But then…

The dip kept dipping. And dipping. And dipping some more.

It's like that friend who says they'll be "5 minutes late" and shows up 2 hours later with a lame excuse about traffic.

And now, your account is deep in the red.

Does this sound familiar?

It’s not your fault because not all dips are created equal.

Based on my research, the best time to buy the dip is when the market has overreacted (where buyers become panic sellers) because the short-term selling pressure has been exhausted.

This overreaction causes the price to be trading below “fair value” and creates a window of opportunity for mean reversion traders to capture a quick profit.

If you want to learn more, I’ll be hosting a Mean Reversion Trading Masterclass on 25 October.

Details on this Google doc here.

Cheers,

Rayner “the-mean-reversion-trader” Teo