Maneuvering for a better position.
I heard this term first time in the chess match commentary, precisely when a player moves their knight from one position to another position where knight get more active options and more control on the board but the overall is not threatening the opponent as such. In other words, it is sometimes called "improving the position". Interestingly though I heard both of these terms in the game but they hold the same meaning and significance in real-life investments in stocks/crypto also where you offset one of your positions that do not seems to moving or generating profit to another position, in which it is expected to make some good returns in the coming days.
One of the aspects of investing is that you can keep "buying the dip" so that you can average out your buying price so that your overall average buy price goes down. In this case, we expect to make a profit on our position whenever the market price of that particular investment goes up.
Another aspect of making an investment choice is that believe in the market sentiments, if the market keeps selling and pushing the price downwards for an asset, then you should also follow market sentiment to sell the assets or if the market keep increasing the value or putting the buying pressure for a specific investment then you should buy that asset and align yourself with the market movement.
Buy the dip vs Go with market sentiment.
Now we have 2 strategies and look like both are in the disagreement with each other. In one strategy you are suggested to buy the dip, means buy the asset when the price is going down, and on the other "go with market sentiment" means that you will be selling the asset when the price is going down in the market. And If I say both are valid and applicable at the same time then do I sound crazy to you? I will explain how you can use both and how they are not conflicting each other.
How I benefitted from both of them.
I had written in my Previous post that how I get benefitted by booking loss on my holdings. Actually, that was the one side of the story and the other side of the story is that I reinvested my capital received after booking my loss to another promising stock.
Source
So the particular stock that I sold, I noticed a very peculiar pattern with it, I noticed whenever the market tanked, it also tanked, and I used this opportunity to keep "buying the dips" and keep bringing my average price down. Actually when I sold it at the loss, I sold it for more than my last buying price but it was an overall loss. In this case I purchased it in the dip whenever the market dipped and did "buy the dip"
But on the other hand I am observing the patter that whenever the market rallying it is not rallying that much so it give me a feeling that market has overall "bearish" feeling with this stock and that can be the only reason that stock is not rallying even I am finding no fault in the fundamentals and business of the stock. I also observed that it is not the "specific sector" issue with that stock because other companies stock on the same sector do rally in the same way as the overall market sentiment.
In this scenario, I put aside my analysis and though process and decided to go with market and do part away with that stock by booking loss and put my capital to another stock in which I got conviction and it is more inline with the overall market sentiment.
So now fast forward to 2 and a half month, stock from which I parted my ways is currently trading below from my sold price (so I saved my further losses here) and stock in which I put that capital is know trading above my buy price and I also claimed dividend also for holding that stock. In this case I can say I have improved my portfolio position by just going with the market sentiments.
So here you can see how both the strategies worked together to help me minimize the loss and get profit.
My 2 cents.
Maybe what worked for me might not work for you in the same way but the essence is that there is no point in keeping yourself invested in a dead position and "buying the dip" that might turn into the "catching the falling knife". So it might be a good option that we should offset our losses and pick something that can yield better returns in the future.
Posted Using INLEO
