Buying the dip, backtested
“Buy the dip” is the most repeated advice in investing and almost never stated precisely enough to test. This page states it: a dip is a day that closed 2% or more below the day before, buying happens at that close, and the position is sold ten trading days later whatever has happened. Every part of that is a number you can change below, and changing it is the point, because the interesting question is not whether one version worked but how much the answer moves when you move the definition.
Over September 2021 to September 2026, this setup lost to simply buying and holding. €10,000 became €10,281 (+2.8%), against €18,051 (+80.5%) for buy & hold, over 24 trades, with a worst fall of 21.4%. Change the ticker below and the picture changes. This is one stock over one stretch of history.
The rules, exactly
This is what the run above loads. Every number in it stays editable: change the ticker, widen the stop, and run it again.
- Buy at the close of any day that fell 2% or more.
- Sell at the close ten trading days later. There is no stop and no target: the calendar is the whole exit.
- One position at a time. A second dip while the first trade is still open is not a second purchase.
- 0.1% commission and 0.05% slippage per side, so the result is not a frictionless one.
Screens for: $10B+ · 1M+ shares a day. That filter does nothing on the single-stock run above. It is the pool this strategy is really meant to trade, and it comes into play when step 1 is switched from one ticker to the whole US stock market. The momentum screener is a free way to see a ranked pool like it today.
What to watch for
This is the version with no judgement in it, which is exactly why it is the one worth running first. It buys dips in a bull market and it buys every step of a crash, because nothing in the rule knows the difference. Two things to look at in the result below before you conclude anything: how it compares to simply holding, which on a rising index is a high bar, and how much of the return came from the handful of trades that caught a bottom. If you want the version that only buys dips while the trend is up, the trend pullback template is that setup with a filter and a stop attached.
Before you trust any backtest
A backtest is a measurement of the past under assumptions you chose, and the assumptions are where results go wrong. Three that matter here: the run covers five years of daily closes, so it has seen one bull market and one bad year rather than a full cycle; fees and slippage are included but your broker’s may differ; and a strategy that fired only a handful of times has told you almost nothing, however good the numbers look. The tool reports the trade count for that reason. Read it first.
Want to change the rules rather than the numbers? The full backtester builds a setup out of plain-English conditions, and this template arrives in it already loaded and editable.
The other prebuilt strategies
- Golden Cross: Hold while the 50-day average is above the 200-day; step aside when it crosses back under.
- 20/50 cross: The same crossover idea as the golden cross, on faster averages: 20-day over 50-day.
- RSI 30/70: The textbook RSI trade: buy when the 14-day RSI drops under 30, sell when it clears 70.
- MACD crossover: Hold while the MACD line is above its signal line; go flat when it crosses back under.
- One-year high: Buy a close above the highest close of the past year; exit on a 50-day closing low.
- RSI-2 reversion: Buy an uptrending market when the 2-day RSI washes out below 10; sell the bounce above 70.
- Trend pullback: In a long uptrend, buy the dip that reclaims the 50-day average, a bounce off the trend.
- Impulse pullback: A fresh 6/18 EMA cross marks a brand-new trend; buy its first small dip as it resumes.
- Donchian breakout: Buy a 20-day high the way the Turtles did; exit on a 10-day low or the 2R target.
- Bollinger reversion: Buy a close under the lower 20-day band; sell the snap back to the middle band.