ClearAnalyserBuying the dip on DEGIRO: set an alert at your entry price
To buy the dip, decide in advance at which price you will buy, for example in three steps of 10%, 20% and 30% below the current price. A price alert tells you when a level is hit, so you can first check whether the drop comes from the market or from bad news about the company. A good-till-cancelled limit order buys automatically, even if the story behind the share has changed.
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The problem with “I’ll buy when it drops”
Almost every investor has a wish list. A stock you find too expensive, an ETF you want to add to in a correction. Then the price drops on a Tuesday afternoon while you are at work, and you only notice once it has recovered.
Or you do notice, at the wrong moment. Barber and Odean showed that private investors mostly buy stocks that grab attention at that moment: stocks in the news, with unusually high trading volume or an extreme one-day return (Review of Financial Studies, 2008). You end up buying what everyone sees, not what you had planned.
An entry level set in advance takes that impulse out. You choose the price at a calm moment; the alert comes when it’s time.
Limit order or price alert?
On DEGIRO you can place a good-till-cancelled limit order: “buy 10 shares if the price is €90 or lower”. That works, but it has two drawbacks.
The order doesn’t ask why the price is falling. If a share drops 20% because the whole market falls, that may be your chance. If it drops 20% because the company halves its profit forecast, the share hasn’t become cheaper; it has become worth less. A limit order buys in both cases.
A good-till-cancelled order can lapse without your instruction. DEGIRO itself writes that it cannot guarantee such an order stays active, and advises checking regularly that it is still there (DEGIRO, Orders and Order Execution Policy).
A price alert buys nothing. You get a heads-up, read the news and then decide. If you can’t react during the day, a limit order is more practical; if you want to weigh the reason for the drop, an alert is better. How to set one up is explained in setting a DEGIRO price alert.
A plan in three steps
Nobody knows where the bottom is. Instead of putting everything on one level, you can split your money:
| Step | Level | What you buy |
|---|---|---|
| 1 | 10% below the current price | a third of your planned amount |
| 2 | 20% below the current price | a third |
| 3 | 30% below the current price | the final third |
If the price only falls 12%, you have at least bought a third. If it falls 35%, you have bought on average just over 20% below the old price.
Don’t pick the levels at random. A previous low, a valuation you consider fair or the level where the dividend yield becomes attractive are better anchors than round percentages. How a lower entry price raises your yield on cost is covered in the dividend article.
How to set it up in ClearAnalyser
In the Scenario Alerts tab of ClearAnalyser you can also follow positions you don’t own yet.
- Add the product. Click “+ Add position” and search by name, ticker or ISIN; you search DEGIRO’s own product range, so you pick the right exchange straight away. Or click the bell icon on the product page in DEGIRO.
- Set three scenarios. Use the “Price below” trigger for each, with your three entry levels. The price chart shows where those levels sit compared with recent months or years.
- Optionally add a daily trigger. The “Day change” trigger at 5% is handy if you want to take a look at any sharp fall, even before your level is hit.
In the overview, set the view to “Outside my portfolio” to see only your wish list. Once you actually buy the product, it moves to “In my portfolio”. The same approach works for turbos, where you follow the underlying; see turbo knock-out alerts.
With Premium you also get an email and an early warning when the price approaches your level, so you have time to read the results before it gets there. With cloud monitoring that continues while your computer is off.
Want to know how much to buy at each step without risking too much? Read Risk/reward and position size.
What to watch out for
A lower price is not automatically cheaper. When the alert comes, check what happened. Is the whole market falling, or only this share?
Keep cash ready. A three-step plan only works if you have the money. Don’t set levels you can’t fund.
Watch your diversification. Buying more of a falling share makes that position larger in your portfolio. How to keep track of your allocation is explained in Rebalancing on DEGIRO.
Frequently asked questions
Can I set a price alert on a stock I don’t own?
Not in DEGIRO itself, because DEGIRO has no price alerts. In ClearAnalyser you can: any product DEGIRO offers can be added as a watch position with up to three levels. Most other tools have no price alerts at all; see the DEGIRO portfolio tracker comparison.
Is buying the dip a good strategy?
For a broad global index, past declines have so far been recovered, sometimes only after years. For individual shares there is no such rule: a share can keep falling after a drop and never recover. That is why it matters to know why the price is falling.
Which is better: a limit order or a price alert?
A limit order if you are sure you want to buy at that level and can’t react in time. A price alert if you want to check first why the price is falling. You can also combine them: an alert at step 1 and a limit order at step 3.
Sources: Barber & Odean (2008), All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors, Review of Financial Studies · DEGIRO: Orders and Order Execution Policy (pdf) · BrokerChooser: DEGIRO price alerts explained