Investing in blockchain markets has grown in popularity in the last few years but as with all trading the new investor must thread carefully.
Whilst digital assets have made millionaires and indeed some billionaires out of speculators and early adopters, the smart investor will still need to exercise some caution as these assets contain risks unique to this type of investment. The astounding growth of Bitcoin in the initial years may be a thing of the past but opportunities for profit still exist. Those who wish to have a balanced portfolio should still consider adding crypto.
This new digital economy has given rise to a new ecosystem of exchanges, software and automated trading systems. In this article we will examine DCA (dollar-cost averaging) trading strategy and the bots that makes it easier to adopt.
What is DCA?
DCA is the idea that you spread the buying of your investment over a period of time.
As an example:
Let’s imagine you want to spend $100,000 on Bitcoin over the period of one year. You have the choice of buying it all initially or say buying $8333 each month when the price is better or buying $8333 each month at the same time every month no matter what the price. The latter is DCA or dollar-cost averaging.
Bitcoin could be selling at $27000 one month and $34000 the next, but you would still invest the same dollar amount every month.
DCA trading purchases can be made on any time period whether it is on a weekly, monthly basis etc. It is totally up to the investor.
One of the biggest advantages of using a DCA strategy is that it removes the investors emotions from the equation and avoids buying at ill-timed prices. The trader who is ruled by emotion might be panicked into buying or selling on price fluctuations. By spreading your purchases out, risk is reduced by averaging out price highs and lows. The strategy is mainly for those who wish to see their asset appreciate over time as opposed to those who speculate on making a quick kill.
Even with the simplicity of the DCA strategy, most investors prefer to automate the task with a DCA bot to remove human error, mundanity and the traders emotion from the equation.
How Does a DCA Bot Work?
DCA bot is a technology which could do your task of purchasing crypto according to your specified frequency such as hourly, daily, weekly or even monthly. Moreover, what is good about the DCA bot is that it could do this task without having to feel, tired or even bored. If you are busy, you will no longer have to worry about purchasing crypto and just let the bot do its work.
How Do You Get Set Up?
The first thing in getting set up is for you to find a provider then you could set up an account. Enter your necessary information which your bot would need for it to work on your DCA trading strategy.
Your DCA bot has the ability to apportion your funds during the day of trading sessions. This means, this bot does not only service swing traders but it is also for those who would want to go into trading more often.
Though trading might seem simple and using a bot would look as if it is a simple strategy, you could be assured that you could make money from it even when the market dips as profits could be computed from the average purchases. In fact, you will be able to refine the parameters of your DCA bot according to your preference and what you thing would be effective depending on different market conditions.
What we like about this DCA bot system is it is simple and straight forward to use. It does not need complex and deep understanding for you to comprehend how this bot works. All you need to do is to understand its basics and for sure you will be good to go.
Keep in mind that DCA bots differ from one another depending on providers. They come with their own instructions and strategies.
Can You Make Money with DCA Strategy?
The good news is, yes, you could make money with the DCA Strategy. It is similar to passive indexing where you could purchase regular amount at a regular interval. Though this is the case, keep in mind that you will have to have a good amount of funds available for you to be able to use this system over a long term period.
DCA trading, as mentioned earlier is profitable especially if the market is at an upward momentum and volatility. For example, bitcoin is selling for $10,000 and it goes up to $15,000 then to $25,000 and then it dips to $20,000 and then goes up again to $29,000 and goes back to $26,000 and then would move to $28,000, we could say that the market could be unpredictable. It could be up today and then down the next day. Though this is the case, if you
continue to buy regardless of its trend over long term, this is actually when and where you could generate value and get gains.
Pros and Cons
· It is time saver
· It is easy to use
· You do not need to be worried about the market
· You will only have to set up your appropriate frequency only once as long as you have sufficient funds for longer period of time.
· You will have to just tweak your strategy to get most from DCA trading
You would be making money out of using this strategy if you believe that bitcoin’s trend is and will go upwards. It could be a different crypto asset as long as you do not mind that there are times when the market goes down for short term period and as long as it rises for long term, then, you could be profiting a lot from DCA trading system
· You will have to stick with it
· You will have to be patient in waiting for automation to make its purchases
Missing Out on Big Profits
Trading comes with risk and this does not exempt DCA trading. However, what is good about DCA trading is that the risk is lesser. Though that is the case, you will still have to ensure that you hold on to it even when there are dips in the market. Remember, the DCA trading is for long term gain which means there would be times that you would experience dips in the market short term.
DCA crypto trading is now one of the trends or tools which are used especially where there are market swings. Though there are a few downsides, but, if you are patient and your risk tolerance is high, the DCA crypto trading is a perfect partner. It provides you a carefree way to be able to trade and it also does not have any active management fees.
Through DCA crypto trading, you could earn an income and afford to have investments at a regular timeframe. Keep in mind, however, if you are taking part in DCA crypto trading, you must believe that it is a sustainable investment in the long term. If you are confident to go with them, then, this one is perfect for you.