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Buying The Dip: Ladderize Your Buying With DCA.

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Written by   121
2 months ago

As we experience a heavy market crash in cryptocurrency for the past 2 weeks, and lots of uncertainties of when should be the right time to buy the coin or token you are eyeing, it could be very hard to determine or to decide when to buy the coin when there's no strong sign of when it will bounce or recover. Especially with what happened in the last weeks when most coin or cryptocurrency are breaking their support values because of the FUDs that has came out one by one causing almost cryptocurrencies lose their value for around-50% to -70%.

Even pro traders that have years of experience already will be having difficulty to determine when to buy when there is a bad fundamentals or should I say bad news for the crypto market. Because usually, when there is a bad news for Bitcoin BTC, a possibility for it to lose its value can happen, and when that happen, altcoins or other cryptocurrencies aside from Bitcoin will suffer more losses of their value.

In this article, I will be sharing one of the best ways to buy to have a possible huge gains in when the market recovers - by using the Dollar Cost Averaging strategy.

What Is Dollar Cost Averaging?

What Is Dollar-Cost Averaging (DCA)?

Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset's price and at regular intervals. In effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of equities at the best prices. Dollar-cost averaging is also known as the constant dollar plan

Definition Source.

In simple terms, using the Dollar Cost Averaging strategy is to ladderize your buying amount in a certain asset. Whether the asset goes up or goes down, it can cover up your possible losses whenever the asset you bought won't go the way you want it or can even secure you a profit when the asset's price is performing very well.

How To Use Dollar Cost Averaging?

Dollar Cost Averaging can be use whether the asset's price is going up or down, but since we are talking about investments and profits in the crypto market, Dollar Cost Averaging is way more suitable to use when an asset is down.

I'll explain this as simple and as basic as I can, here's the scenario:

Let's say that you have an extra money of exactly $1,000 that you want to invest in Bitcoin Cash. And the current price of Bitcoin Cash BCH is $1,000 per BCH but you think that the price is high already and you don't want to get FOMO or fear of missing out. So you waited instead for a good entry before buying Bitcoin Cash BCH at a much cheaper price as possible.

Then time comes that you saw the price of Bitcoin Cash BCH going down and reached $900 per coin meaning it lose -10% of its value. But you are very uncertain if the price can bounce or if it will go down more so you decide to only put $200 to buy Bitcoin Cash BCH.

After sometime, Bitcoin Cash BCH dropped down again and reached $800, meaning it lose its value of -20%. You though that it's a very great opportunity but still uncertain if there will be more downside after it so you only put $300 in it at the price of $800 per BCH.

Hours, days, or weeks later, BCH dropped down to $600 price and you thought once again that it's a rare opportunity and feels very comfortable that this will be the deepest price of BCH can get so you use your remaining $500 and buy BCH with it.

Let's do the math.

1st buy: $200 at $900 BCH price: 0.2222 BCH.

2nd buy: $300 at $800 BCH price: 0.375 BCH.

3rd buy: $500 at $600 BCH price: 0.83333 BCH.

TOTAL: 1.43053 BCH.

Using the Dollar Cost Averaging strategy, you have accumulated 1.43053 BCH instead of just having 1 BCH is you bought it all when BCH was at $1,000 price.

What could be your profit?

Assuming that your last buying price, which is $600, was the deepest price of BCH and bounced back very hard that it reach $1,000 again, then you will have now a profit of $430.53.

And because you used DCA, your breakeven will be at $700 price of BCH and you can take your money out in that price without losses of you think that BCH can still go down after it.

Final Say.

Cryptocurrency can be predicted if you have enough knowledge in technical analysis. But, even though you have it, fundamentals can still ruin TA. That's why we should trade very cautious.

And with the help of DCA, you can avoid the risk a huge possible losses when a bad fundamentals hit the crypto market.

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Written by   121
2 months ago
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Comments

Am doing DCA, kaso la tlga pangbuy ..sayang dami on Sale

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2 months ago

Kaya nga. Sarap bumili ng buong BCH para ihold e.

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2 months ago

Diko pa rin gets kaya save muna.

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2 months ago

Awit. Sorry 😂 Explain ko pa sa susunod 😂

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2 months ago

Malinaw naman, mahina lang yalaga ako sa crypto terms. Lam mo na tamad mag aral.

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2 months ago

Technical analysis only 60% chances of predicting right but if you know fundamental then it's good to know everything

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2 months ago

Yeah, no matter how good you are in the chart, fundamentals/news can messed it up.

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2 months ago