In general, it refers to buying assets of a firm or country by long term investors who look out to capitalize on the opportunity of temporary weakness in the firm’s or country’s fundamentals, in the hope that the assets will return to their real value levels over time as the weakness disappears.

In trading, it refers to buying stocks whose price is falling due to temporary downside pressures. Traders and value investors see such underpriced stocks an opportunity to buy at low prices and wait until fundamentals work out again in favor of the stocks, sending their value back to real levels. Buying the dip could be a viable value-based strategy. An example is buying a stock when it falls to a 6-month low. The buyer would be better off than other traders who bought the stock in the past 6 months.

Buying the dip (BTD) is usually measured by money flow (inflow to the weakened stock) and up/down ratio (the value of uptick trades relative to the value of downtick trades).

It is also known as longing on weakness or buying on weakness, or for short as BoW.