Question 1

How does the buy-the-dip strategy work?

Accepted Answer

You start with a cash reserve. Optionally a day-one amount is invested immediately and the rest stays as dry powder. Each time the price closes a full trigger percentage below its running all-time high, the model buys one fixed-size tranche. It then waits for the stock to print a new high before it will fire again, so it is one buy per dip episode rather than one per day underwater. Buying stops when the reserve is exhausted.

Question 2

What is the buy-and-hold benchmark?

Accepted Answer

The buy-and-hold benchmark deploys the full reserve on day one and never sells. Because both strategies start with the same capital, any underperformance from the dip strategy is honest cash drag from holding dry powder rather than a stacked comparison.

Question 3

What inputs can I set in the backtester?

Accepted Answer

You can set the ticker, the time period (preset years or an exact start and end window), the reserve capital available to deploy, the share deployed on day one, the dip trigger as a percentage below the all-time high (preset or custom), and the dollar amount bought per dip.

Question 4

Which performance metrics does it report?

Accepted Answer

It reports final value, total return, CAGR (compound annual growth rate), maximum drawdown (largest peak-to-trough drop), annualized volatility, the Sharpe ratio and the Sortino ratio, comparing buy-the-dip against buy-and-hold side by side.

DIP//TERMINAL — Buy-the-Dip Backtester