3 Price Action Models for Buying the Dip

For many traders, the journey to professionalism involves mastering multiple markets—futures, stocks, crypto, forex, and more. A key skill in this progression is asset selection, which enables traders to stay active and uncover high-quality opportunities across a variety of markets. By focusing on assets that are “in play,” traders can achieve higher returns and a stronger win rate. But how can we effectively filter for these high-potential assets or tickers? We generally look for three things:

1. High relative trading volume: Lots of recent buying and selling compared to “normal” weeks.
2. Strong momentum: Consistent price movement over a period of time (mostly up or mostly down).
3. Widespread attention: Assets that traders (and even non-traders) are talking about.

Once we identify the outperforming assets, we look to find entries on these tickers. Of course, each market trades differently, and no trading setup is entirely universal. A chart is simply the history of price, time, and volume. But the more a setup relies on these three variables (rather than complex indicators), the more widely it can be used.

In this article, we’ll explain three entry models that use simple tools—price, time, and volume—to help you find better buying opportunities during a dip.

1. Anchored VWAPs

The Anchored VWAP, or aVWAP, is a tool that shows the average price at which an asset has been traded, weighted by volume, and starting from a specific point in time. It’s similar to a regular moving average, but it relies on volume instead of time. Unlike the regular VWAP (Volume Weighted Average Price), which resets every day or every week, the aVWAP starts from a point you choose, such as a breakout or a significant low on the chart.

Why It’s Useful

When an asset breaks out of a range, its previous support and resistance levels may no longer apply, especially on shorter time frames. This is because the market is trying to find a new “fair value.” The aVWAP helps you identify this fair value based only on the recent trading activity that we care about: where are participants actively buying the most?

How to Use This Setup

• Identify an asset that just broke out of a range or made a notable pivot low on high volume.
• Anchor the aVWAP at the breakout candle or pivot low.
• Watch for pullbacks toward the aVWAP. If the price bounces near it or fails to close below it, it can signal a potential entry.
• Place your stop loss below the aVWAP after a rejection of the line has been confirmed

Things to keep in mind:

• Because the aVWAP is a volume-based measure, the market tends to get choppy around these levels. Patience is key in order to determine (and confirm) a rejection of the aVWAP to the upside.
• In certain markets, the aVWAP and standard VWAP may follow each other very closely. If the standard VWAP has a history of offering better entries on a particular asset, it may be worth favoring over the anchored version.
• Like all levels, the aVWAP is more of a “zone” than an exact price. Rejections may not reach the aVWAP down to the tick, and a rejection can often be considered “close enough” to the level without touching it.

2. Previous Range Point of Control (POC)

The Point of Control (POC) is part of a tool called the Volume Profile. The Volume Profile shows how much trading occurred at different price levels. The POC is the price level with the highest trading volume in a specific time range. It represents a “fair value” for the market, similar to the aVWAP.

Why It’s Useful

Sometimes you may not have a clear spot to anchor a VWAP, but there is a well-defined old range the asset recently broke out of. Commonly, after a breakout, the price will come back to test the POC of that previous range, as the market looks to reject “old” fair value in favor of higher prices.

How to Use This Setup

• Identify the old range the asset recently broke from.
• Apply a Fixed-Range Volume Profile over that breakout range to find the level with the highest volume (the POC).
• Watch for pullbacks to the old POC. If the asset refuses to break or close below it, this can serve as an entry confirmation.
• Place your stop-loss below the rejection.

Things to keep in mind:

• Old POCs are often found at lower prices than where traders would expect to find a support/resistance flip. If an old POC is “too low” relative to current price, a retest of it may mean the asset is no longer bullish, or has entered ranging conditions.
• Some traders prefer to use a time-based volume profile, known as a Market Profile or “TPO” (Time-Price Opportunity), which typically uses 30 minute candles to determine its distribution rather than volume. Both the Volume Profile and TPO employ the concept of a POC, and both types of POCs can be used.
• Like all levels, the POC is more of a “zone” than an exact price. Rejections may not reach the POC down to the tick, and a rejection can often be considered “close enough” to the level without touching it.

3. Stop-Run of a Key Liquidity Level

A Stop-Run, also called a Swing Failure Pattern (SFP), happens when large traders or institutions deliberately trigger stop-loss orders at key levels to create liquidity. This allows them to execute large trades before the market reverses direction. In addition to triggering stop-losses, these moves encourage breakout traders looking to short into the new low, adding fuel to the fire for a squeeze higher.

This setup works best near clear pivots or liquidity zones where stops are clustered. A quick breach of these levels followed by a reversal can signal a completed SFP and a potential entry near the bottom of a range. To many traders, this is what’s known as “market manipulation” (no, this isn’t illegal).

Why It’s Useful

Of all the setups, an SFP offers one of the highest risk-reward profiles because it provides bottom (or top) entries if the setup is valid. This allows for much higher position sizing as the stop loss will tend to be closer to the entry signal. However, the probability of these trades working is often lower than other setups because an SFP technically constitutes a “break of structure” (lower low in a bull trend or higher high in a bear trend). 

How to use this setup:

• Identify an asset that has been rangebound after a period of bullish momentum, and check whether the range has clustered stop loss levels or a series of higher lows that may look like a staircase
• Draw a horizontal line from the lowest low or a major pivot low where the market temporarily reversed.
• Wait for a wick into the level with a candle close back above the level, which confirms the SFP entry.
• Place your stop-loss under the SFP candle wick.

Things to keep in mind:

• This setup requires a more intuitive understanding of how traders may be positioned in a market, and although nobody knows exactly where everyone’s stop losses are, we can make educated guesses based on the pattern of the chart. Put yourself in a trader’s shoes who is long from “support”. Ask yourself where they are most likely to have their stop losses.
• SFPs require the market to wick through at least 5 or more previous candles in order to be considered an SFP. A wick past the previous 2 or 3 candles is not an SFP.
• Because SFPs happen in rangebound conditions, take profits should be more conservative (at least partial profits); i.e. the other side of the range rather than new highs or new lows.

Final Thoughts

These are only a few of the many successful entry models traders use in a bull market. While tools like Anchored VWAPs, Points of Control, and liquidity-based setups offer a solid foundation, consistently outperforming the broader market with in-play stocks, futures, or cryptocurrencies requires a deeper understanding of market behavior, strategic refinement, and the ability to adapt to changing conditions. These skills are what separate intermediate traders from professionals.

As with any setup, confidence in trading these requires significant backtesting for specific markets, providing you with the data necessary to execute and appropriately size positions without emotions. These are not cheat-codes or easily automated strategies, and require trader discretion which comes with experience.

Ready to refine your trading approach even more?

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