Dip Buying Trading Strategies That Work

52 Week Lows

When a stock puts in a 52 week low this means the stock price is the lowest it has ever been in the previous 52 weeks. This is the first trading strategy I tested using a scientific method. That is, I made trades, and logged all of the results into a spreadsheet.

Why Buying 52 Week Lows is a Good Strategy

Stocks making 52 week lows are very easy to find. There are plenty of free scanners out there, and they're also listed on this website.

Another good thing about 52 week lows is that there's no particular hurry to buy a stock. When a stock puts in a 52 week low it doesn't often rocket off the low, except if there's a general market panic like in March 2020 or April 2025.

For dividend stocks, buying them at 52 week lows can be very attractive. Because the stock price is so low, the dividend yield will be higher than it has been for some time (yields increase as the stock price decreases; assuming there's no dividend cut of course).

Does buying stocks at 52 week lows work? My testing suggests that it does. I bought 208 52 week lows in the autumn of 2024. At the time of writing (July 2025) 68.75% of the trades were profitable.

The strategy has also been successfully tested by Luke L. Wiley who wrote about it in The 52 Week Low Formula (Wiley Press, 2014). His strategy was backtested by Morningstar and was shown to outperform the market as a whole.

Why Buying 52 Week Lows is a Bad Strategy

My experience has been that although 52 week lows usually mark A bottom in stocks, they're not always THE bottom. About the only exception to this are the highest quality stocks (and ETFs). These instruments rarely make 52 week lows. When they do it's usually at a time of panic, such as in 2008, or in 2020.

Don't get me wrong, I do like the 52 week low strategy. However I believe there are other strategies that are better at pin pointing a medium term bottom in stocks.

The other drawback with 52 week lows is that sometimes there aren't any to buy, or the stocks making 52 week lows are of lower quality. This happens after a huge panic, where almost all stocks make a new 52 week low. This happened in March 2020. For the following year almost no stocks made fresh 52 week lows. So if it was your only trading strategy then you would not have had many buy signals for an entire year - until March 2021.

50 Day Lows

When a stock puts in a 50 day low this means the stock price is the lowest it has ever been in the previous 50 days.

Why Buying 50 Day Lows is a Good Strategy

If you want to buy the highest quality dividend stocks on pullbacks, 50 day lows can be a really good signal to wait for. Many of the Dividend Kings almost never put in 52 week lows. So you could wait several years or even a decade for a really good chance to buy the stock at an incredibly attractive valuation.

By contrast, 50 day lows occur much more frequently. I've personally bought a lot of super high quality stocks at 50 day lows.

My testing with real money suggest that 50 day lows are more profitable than 52 week lows. However this might just be due to the condition of the market at the time when I added this strategy to my previous strategy of buying 52 week lows. Another factor could have been my preference for buying higher quality companies at 50 day lows, because the same companies so rarely put in 52 week lows.

Why Buying 50 Day Lows is a Bad Strategy

The major drawback I've found with 50 day lows is that it's difficult to scan for these pullbacks. There are many sites that allow you to scan for 52 week lows. By contrast the only free scanner I could find for 50 day lows is FinViz. It's an option on their stock scanner. However, I found it a little buggy. The other problem is that FinViz only covers US stocks. To find UK stocks at 50 day lows I had to create my own scanner. This is probably the same for other markets. Please do let me know if you find a good (and preferably free) 50 day scanner. You can of course find quality stocks at 50 day lows here on BTFD Bot.

Incidentally the exact number of days doesn't matter too much. So the results from buying a stock at a 60 day low will likely be the same as buying at a 50 day low. I would just be wary of shortening the timeframe to say 30 days. The shorter the timeframe the more risk there is in swing trades going bad.

Williams %R

Williams %R is a very common technical indicator. It is an oscillator that shows the current price in relation to the previous X number of prices. The usual number of X is 14. In the chart signals on this site the value of X is set to 70 days (i.e. 14 weeks). The buy signal is hit when the value of the Williams %R oscillator goes below -90 (negative 90).

Why Buying When Williams %R < -90 is a Good Strategy

I started trading using 52 week lows, but I always felt that the 52 week low point was not always THE bottom of a stock's cycle of being oversold. I researched a number of other indicators of oversoldness and settled for the weekly Williams %R being below -90. In my extensive backtesting this signal resulted in better potential profits than by just buying the 52 week lows. I now use this indicator as my main entry signal for longer term swing trades of the highest quality stocks and ETFs.

Another advantage is that Williams %R is a widely known about indicator. If you use a technical analysis charting application or website, it's very likely that this oscillator is already built into the technical analysis toolbox.

Why Buying When Williams %R < -90 is a Bad Strategy

It has been my experience that the highest quality stocks (e.g. Coca Cola) do not stay in the oversold region for long.

Like all indicators that show oversoldness, they don't offer much protection against a stock getting even more oversold. A good way to mitigate this is to use the indicator on higher timeframe charts. It is for this reason that I use the indicator on the weekly charts.

Large Gap Down

This is a strategy I stumbled upon by accident. I was watching a YouTube video about an award winning trader. One of his entry strategies was to buy stocks when they gapped UP. I coded this strategy into my backtester and the results were rubbish. It was such a poor strategy when I tried it on my database of value stocks!

Just for fun, I reversed the logic and set my backtester to buy stocks when they gapped DOWN. The results were amazing. It is one of the most profitable strategies I have ever backtested. I am also testing the strategy with real money. So far the results are encouraging, and mirroring the backtests.

Why Buying Large Gaps Down is a Good Strategy

This strategy taps into investor psychology. Stocks usually gap down because there is bad news regarding the stock (e.g. a bad earnings report) or the market itself has a panic (think March 2020 or April 2025). When sellers panic there may be few buyers, so the stock almost always gets oversold to the downside. Eventually buyers will turn up, but they tend to make decisions more slowly than the panic sellers. So what often happens is a stock will go down a lot, and then it will bounce back up.

Large gaps generally occur more in lower quality stocks. If they occur in the highest quality large cap dividend stocks then this often marks an incredible buying opportunity.

Why Buying Large Gaps Down is a Bad Strategy

Gaps down mean something has gone wrong and it's possible a stock will get even more oversold. But it is my experience that higher quality stocks only tend to gap down big at the time of maximum pain.

Be aware that one size fits all is not always appropriate for this strategy. The size of the gap depends on a stock's quality and volatility. After some number crunching in my stocks database I have determined that the optimum size of a gap down for stocks generally is 4%. With the highest quality stocks and ETFs 3% is a good signal. For more precise results on particular instruments experimenting with standard deviations from the average gap size may yield good results. Again, my testing suggests that a minimum gap of 3-4% is a good baseline.

One final warning: quality stocks can often make large gaps down if they're falling out of a bubble. These bubbles are usually due to 'good' stories that investors fall for. For example, the AI bubble, and epic the 2025 bubble in EU defence stocks.

Rate of Change

I stumbled upon this strategy on YouTube, then coded it into my backtester. This looks for a period when the stock's price is more than two standard deviations from the mean, followed by a short period when the stock's momentum is positive.

Why Buying Rate of Change is a Good Strategy

This taps into investor psychology and attempts to identify the point at which bad news becomes less bad news and buyers start returning to the stock or sector in question.

The indicator also has a good success rate on backtests.

Why Buying Rate of Change is a Bad Strategy

This is a rare indicator and does not occur that frequently, especially in the highest quality stocks and funds.

It is also a fairly complex indicator to scan for stocks and it's far less obvious on stock charts compared to other indicators. The indicator's settings are also fairly dependent upon the individual stock/fund's general volatility.

As with all general oversoldness indicators, a stock can of course go lower and become even more oversold.