Buy the dip is the most repeated advice in markets. So we finally tested it honestly.

The setup: a dip = any day the index closes down 2% or more. The rule = buy the close, hold 10 days, sell. Mechanical, no gut feel.

Here's the part almost nobody does. We didn't compare it to cash — we compared it to random buying. A thousand random entry days, same 10-day hold. Because the market drifts up over time, almost any buying looks smart. The real question isn't "did I make money." It's "did this rule beat a coin flip picking the day."

The deflating result: buying every 2% dip returned about +0.5% per 10-day hold. Random entry returned about +0.4%. Statistically, a shrug.

But averages lie. When you buy every dip, you're mixing two opposite trades wearing the same red candle: the pullback that bounces, and the first step of a 40% collapse. The downtrend dips carried max drawdowns near 18% while you sat there hoping.

The fix is one line. Only buy the dip when price is above its 200-day moving average.

• Dips bought above the line: ~+1.3%, higher win rate, shallow drawdowns.
• Dips bought below the line: ~−0.6%, and did most of the bleeding.

Same signal. Same hold. One condition flipped a trap into an edge.

What a disciplined trader does: before buying any pullback — index, single stock, sector ETF, crypto — ask one question: is it above its long-term trend, yes or no? If no, you're not buying a dip. You're funding someone else's exit. And test any rule against random entry before you trust it.

This is one illustrative backtest, not a promise — and this is educational commentary, not personalized financial advice.

Full walkthrough here: https://youtu.be/9-jcdVPXBXw

— Paragon