The Bitcoin DCA Strategy Easily Explained
In this post, I want to go over a strategy that beginners can implement with any asset or commodity that have solid fundamentals.
Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Explanation
- A lot of people have a hard time timing the market, and buying the exact bottom of a dip.
- In this post, I want to explain a strategy that the average joe can use, in order to optimize their average entry price of their position
- DCA, or Dollar Cost Averaging, is when investors divide up the total amount of capital they're willing to invest in, and simply invest a portion of it regularly, regardless of price action and volatility.
- So for instance, buying Bitcoin every Monday regardless of whether it has formed a new all time high, or has corrected 30% from its local top, is an example of DCA.
- We can apply this idea with a slight twist, and aim to buy the local dips.
- Above, we see Bitcoin's daily chart on the logarithmic scale.
- The 5 Simple Moving Average (SMA) is marked in blue, 20 SMA in green.
- A very simple DCA strategy would be to buy at the 20 SMA when the 5 SMA is at a downtrend.
- Looking at the price action of the past, we can roughly backtest this strategy.
- The points marked by the red circle would be regions where we would have entered a position for Bitcoin.
- Given that we enter $10,000 for each position, we would have entered a total of $50,000 at 25k.
- Giving us 140% returns, this would amount to $120,000 today.
Conclusion
If you're struggling with technical analysis and you're having a hard time educating yourself on buying the right dips, refer to this idea, and try to think of your own way of dollar cost averaging through a simple strategy, as simple as referring to the moving averages.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Explanation
- A lot of people have a hard time timing the market, and buying the exact bottom of a dip.
- In this post, I want to explain a strategy that the average joe can use, in order to optimize their average entry price of their position
- DCA, or Dollar Cost Averaging, is when investors divide up the total amount of capital they're willing to invest in, and simply invest a portion of it regularly, regardless of price action and volatility.
- So for instance, buying Bitcoin every Monday regardless of whether it has formed a new all time high, or has corrected 30% from its local top, is an example of DCA.
- We can apply this idea with a slight twist, and aim to buy the local dips.
- Above, we see Bitcoin's daily chart on the logarithmic scale.
- The 5 Simple Moving Average (SMA) is marked in blue, 20 SMA in green.
- A very simple DCA strategy would be to buy at the 20 SMA when the 5 SMA is at a downtrend.
- Looking at the price action of the past, we can roughly backtest this strategy.
- The points marked by the red circle would be regions where we would have entered a position for Bitcoin.
- Given that we enter $10,000 for each position, we would have entered a total of $50,000 at 25k.
- Giving us 140% returns, this would amount to $120,000 today.
Conclusion
If you're struggling with technical analysis and you're having a hard time educating yourself on buying the right dips, refer to this idea, and try to think of your own way of dollar cost averaging through a simple strategy, as simple as referring to the moving averages.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
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