◎Buying on dips and selling on pullbacks pitfalls are created by the mind and can be avoided with mental management ~ when there is justification, develop the habit of thinking in terms of a a “set” ~

Genesis Mental Management.16

Mental management has often relied on slogans and anecdotes, but this time it focuses on mental management centered around trading.

If you buy, buy after it has dropped and sell when it has risen.
This is the orthodox path.
You buy because you think it will rise further after it has risen.
From the point of purchase, if the price falls and the speed of the decline is rapid, you become scared of a ‘big loss’ and end up selling; afterward, it indeed goes on to reach new highs as you predicted…

Trades like this are frustrating.
What should be done?
Here, the opening paragraph’s “buying on dips” becomes the master strategy for a rising market.
A trend-following buy trade in the market. Buy when it has fallen.
What a brilliant trade it would be if it breaks to a new high.
This is only true if the dip-buying strategy works, and of course there are pitfalls.
① Early triggers
There is a sense of urgency not to miss out, thinking the decline isn’t complete yet as it starts to rise, which leads to premature triggers.
② Mistaking a reversal rally for a dip
Bought during an uptrend with the sense of a bargain, but it isn’t a dip-buy; you end up buying near the high.
There are other dip-buying failures I suppose, but in such a sequence the important thing is to maintain the mindset: “If it goes up and dips, I’ll buy when it’s cheap! If it buys, there could be a breakout with the momentum of the previous rise!”
The biggest pitfall is, of course, getting caught at a high price.
If you’re already convinced that it has reversed, a deep pullback becomes a bad situation.
If you couldn’t dip-buy successfully, you might again search for positive reasons to hold a position, wondering if it’s forming a double bottom and trying to push lower.
If dip-buying entered but you’re aiming for the second bottom of a double bottom, trading time extends into extra innings.
Even if the development isn’t favorable, you might push ahead with a positive position management.
There are also developments where you end up sinking deeper rather than finding a breakthrough.
In the end, you may completely capture the intended price swing.
So how should you respond in such times?
There are multiple retreat strategies, such as a breakdown of the rationale and withdrawing, but before that you should perform technical analysis.
Was entering on the dip-buy correct?
Is it simply a deeper dip, or does it require reanalysis?
First, look at the highs and lows.
How is the current price compared to the previous day’s high and low?
Check if you hold positions at pivot levels where there is a sense of price achievement.
For dip-buy entries, verify the near-term high price action across various timeframes.
Also check the divergence with moving averages.
If you drift too far away from the moving average, the so-called magnet effect may pull prices back toward the moving average; as the price action converges with the moving average, reconstruct scenarios based on understanding and forecasting of the moving averages.
When holding a position, also consider whether indicators or market open/close movements could cause accidental price moves; time awareness is necessary.
If you entered on a dip-buy and the development differs, the time you remain trapped could become quite long.

As the pre-entry scenario (basis) becomes structured, confidence grows.
Because it’s a scenario with a basis for entry, you should not only have a trade with a basis but also set two scenarios: a trade with a basis and a retreat if the basis collapses, which enables calm decision-making in position management.
As a result…
◯ Calm re-analysis
◯ Prepare an alternative bad scenario that is not fixated on dip-buy; it will make retreat easier

① If it proceeds in line with expectations, hold until the target
② If it goes against expectations, retreat as per the bad scenario
③ If neither, a stagnation is likely where you lack confidence whether it will rise or fall, so retreat immediately
④ If price action is volatile and judgment is difficult, switch to a 1-hour chart or longer for decision

Surprisingly, many people prepare only for the outcome they expect.
For example, in slot machines, you think, if you hit this zone you’ll win; if you miss, you’ll stop because it’s a deep top.
If you don’t know this, you’ll still win but money will drain significantly.
That’s why some set a number of plays and others keep playing until they hit, and the financial outcomes differ greatly.

We traders sometimes feel that our chart analysis and entry-point determination exceed that of large players.
If volatility exists and entries are good, yet money doesn’t grow much, then the path to improving position management and mental management is clear, so I’ll continue to discuss mental management from various angles.