While it’s common to see traders use various tools, techniques, and strategies that differ across the board, there is one strategy that we believe every trader should consider adding to their arsenal, especially in a bear market!
Dollar-Cost Averaging, better known as DCA, is the subsequent periodic purchase of a security irrespective of its trading price.
DCA has been a popular strategy among the savviest investors for quite a while as it has proven its effectiveness compared to other plans, such as trying to time the market bottom and making lump sum investments when the time “feels” right. It’s known to many as a way to mitigate risk.
DCA is undoubtedly a powerful method, as this quick example below shows.
In scenario one, if someone has $1,000 to invest and decides to use the entire amount to buy their favorite crypto in one purchase, which is $10 each, they would have a hundred shares at a cost-basis (average share cost) of $10.
On the other hand, in scenario two, you may have someone else who decides they will buy $500 worth of shares every month for two months.
They purchase 50 shares at $10 each in the first month, equalling $500. However, in the second month, the price of the shares fell from $10 to $5, so they were able to buy 100 shares at $5 each, equaling the remainder of their $500.
Scenario 2 ended up with 150 shares (50 first month, 100 second month), while Scenario 1 only ended up with 100 shares.
Traditionally, an example spread across more extended time frames would be more suitable; however, given the nature of crypto, especially during a bear market, we found this one fitting.
Whether one’s an aspiring day-trader, perhaps they are a periodic swing trader, or even a full-time day trader, one thing is true for each category, our emotions get in the way.
When that happens, our logic and ability to process even the simplest of decisions go right out the window, which can cause us to make rash decisions and lose money.
We may have had our eye on a retracement target for quite some time; however, for some reason, upon retracement, we decide to wait until it goes just a bit lower to “go all in.”
Then, a whipsaw candle spike up leaves us with a “we just missed the bottom” feeling.
DCA is essentially a plan that brings structure to one’s investment strategy in an auto-pilot manner, relieving one from the duty of having to obsess over this allocation of funds.
A common phrase you may have heard is, “time in the market beats timing a market” – simply put, those who can time an exact market top and or bottom successfully and go all-in at the right time are slim to none.
Overall, the goal is to get the lowest cost basis possible, and one way to help increase the odds of this happening is to begin DCA in a bear market instead of a bull market.
In our “Winning Trades Under Any Market Condition”, we shared our thoughts on how we felt that a trader should be able to profit in any market condition: bull, bear, or even sideways trading market.
Well, you can award another point to the bear market category for us because, in our eyes, a bear market is perfect for DCA’ing.
In a bull market, the price of the asset you are periodically purchasing will more than likely increase in price, thus raising your cost basis versus DCA in a bear market, where the chances of the asset’s price will likely decrease over your periodic lots (asset purchases) resulting in a lower cost basis.
This average price-down mentality is optimal for those who may be looking to add some coins to their hodl bag, even if they are classified as day traders.
Of course, just like every other strategy, there is no one-size-fits-all when it comes to DCA; it can and is deployed in various forms and fashions.
To prove how much of an advocate we are for DCA, we’ve put our hard work where our mouth is and are pleased to announce the roll-out of our newest trading feature, the DCA Bot.
We’ve told you why we thought it was an effective strategy and even shared in-depth insights; now, we want to give you the last piece of the puzzle, an actual custom-built DCA Bot that allows you to start taking advantage of this strategy immediately.
Cornix Advanced DCA Bot was built to provide additional strategies and opportunities for our community members to thrive during every market condition.
When Cornix Advanced DCA bot is active, the trader will be in an open trade, either periodically purchasing lots on price decreases or waiting for a sell to fill once the asset’s price has rebounded to a place of profit.
Once a trade is complete (the trader has taken profit, or a stop-loss was triggered), a new trading cycle will begin.
At Cornix, our goal is to build flourishing traders, and we know that this can only be done if we provide the necessary knowledge, tools, and opportunities to our community.
We understand that not everyone has the same trading background experience, and we created our Advanced DCA Bot with that in mind.
For those who may not be as comfortable establishing their own DCA parameters and rules, we’ve integrated an option that allows you to copy and initiate the most successful proven DCA strategies that top traders use with just a few clicks.
And for our advanced traders, you won’t get bored, we promise.
Get as technical and spend as much time customizing your DCA Bot as you’d like.
It’s time to sidestep the FOMO and market volatility – whether you think we’re headed up or down next, now may be the best time to start your DCA journey.
Copy a Public DCA Bot, or create your own; try it for free for the next 14 days; no payment information is required.