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How to dollar cost averge with precisionI've seen several dollar cost averaging calculator online, however there is something I usually see missing. How many stocks should you buy if you want your average cost to be a specific value. Usually the calculators will ask how much you bought at each level ang give you the average, but not the other way around (telling you how much to buy to make your average a specific value). For this, I decided to make the calculations on my own. Here, you can see the mathematical demonstration: www.mathcha.io
NASDAQ:TSLAEducation
by DarkMessiah777
Bull Market Booming: Top Tips to Maximize Your Investment Gains!It appears that a bull market has taken hold in the US market, as evidenced by the remarkable rise of the S&P 500 index, surging over 20% from its October lows. Adding to this favorable outlook, the Federal Reserve has finally implemented a much-anticipated pause in the cycle of interest rate hikes. With the shift in market sentiment from bearish to bullish, investors are eagerly looking for avenues to leverage this upward trend and make the most of the prevailing conditions. Today, we will delve into the various factors that indicate the arrival of a bull market, along with strategies and invaluable tips to help you seize the opportunities presented by this favorable market scenario. What Lies Behind All This Optimism? The current wave of optimism in the market and the emergence of a new bull market can be attributed to several significant factors that are often overlooked or avoided in discussions. One key reason behind this optimism is the remarkable earnings results reported by companies. Investors are celebrating the fact that companies are no longer delivering mediocre performance. Instead, they are exceeding expectations and showcasing strong growth. This shift in mindset from accepting average results to embracing a "glass-half-full" outlook is driven by the realization that companies are meeting and even surpassing the high growth expectations set for them. This surge in optimism is fueled by the confidence that companies have proven their ability to generate substantial earnings and capitalize on market opportunities. Investors are therefore responding by driving up the market and contributing to the overall bullish sentiment. It is important to acknowledge and consider this fundamental aspect when discussing the reasons behind the current optimism and the substantial year-to-date increases observed in the market. The impressive performance of companies and their ability to meet or exceed growth expectations have played a vital role in shaping the current bullish market sentiment. S&P 500 daily chart The positive forward guidance provided by CEOs further reinforces the current optimism in the market, as it signals their increased confidence in navigating challenges, particularly those posed by inflation. A notable example of this trend can be seen in Nvidia's Q1 earnings report, which highlighted the company's upwardly revised guidance. This adjustment reflects the strong demand for AI technologies that power applications at major industry players such as Google, Microsoft, and OpenAI, the creator of ChatGPT. Nvidia's projected revenue of $11 billion for Q2 significantly surpassed the estimates put forth by Wall Street analysts. This impressive figure serves as tangible evidence that the AI craze is more than just hype. The surge in demand for graphics processing units (GPUs) from both established tech giants and startups as they develop their AI platforms has been a key driver behind Nvidia's remarkable performance. As a result, the company's shares experienced a staggering 26% surge, propelling Nvidia's market value to an extraordinary $1 trillion. This achievement places Nvidia among the elite group of publicly traded US companies that have reached this milestone, joining the ranks of industry giants such as Apple, Microsoft, Google parent Alphabet, and Amazon. The significance of Nvidia's market value milestone further solidifies the notion that the demand for AI technologies is substantial and here to stay, providing a strong foundation for the ongoing bull market in the US market. Tesla stock daily chart Tesla has also emerged as a significant player worth noting in the current market landscape. The company has experienced a remarkable turnaround, with its stock value surging by an impressive 70% over a six-month period, including a notable 53% increase in the past month alone. This is a noteworthy development, considering that Tesla had suffered a substantial loss of around two-thirds of its value in 2022. The strategic and timely price cuts implemented by Tesla, although initially perplexing to some, are now proving to provide the company with a potential market share advantage. These price adjustments have contributed to the renewed interest and confidence in Tesla, ultimately fueling its recent resurgence. As the Q1 reporting cycle has concluded, the results reveal a strong performance for tech stocks in the latter half of the year. This surge can be attributed to the prevailing optimism surrounding the Federal Reserve's approach to nearing the end of its rate hike cycle. The anticipation of higher interest rates, coupled with concerns of slower economic growth and softer labor market conditions, has contributed to a decline in inflation. Surprisingly, the adverse effects that were initially expected to impact households and businesses have been less severe than initially predicted. Furthermore, with the concerns surrounding the US debt ceiling alleviated and the mitigation of inflation risks, the overall market sentiment has undergone a transformation from bearish to bullish. This shift in sentiment is likely to continue, with stocks, particularly mega-cap tech companies like Tesla, expected to maintain strong returns throughout the remainder of the year. Overall, Tesla's impressive turnaround and the positive performance of tech stocks exemplify the overall market's optimistic outlook, driven by a combination of factors such as Federal Reserve actions, inflation dynamics, and improved market conditions. Top Bull Market Stocks to Consider Buying Now: Tesla (TSLA) This is not financial advice. Indeed, Tesla's influence extends beyond its position as a dominant player in the electric vehicle (EV) market. The company's offerings go beyond vehicles and encompass solar and energy storage solutions. Tesla's plans to establish a factory in Shanghai for manufacturing Megapack batteries further solidify its position as a leader in the renewable energy sector. These batteries play a crucial role in storing renewable energy, alleviating strain on the grid during peak hours, and promoting a more sustainable energy ecosystem. While Tesla's growth will be primarily driven by its vehicle production, the company's positive outlook is reinforced by upcoming price cuts and the launch of new products such as the highly anticipated Cybertruck and Semi. These product expansions contribute to the company's overall growth potential and indicate its commitment to innovation and diversification within the EV market. Despite some mixed recent financial results, investing in Tesla during the current bullish market phase is seen by many as a reasonable bet on the company's potential to become the world's largest automaker. Tesla's strong market presence, technological advancements, and commitment to sustainability have garnered significant investor confidence and positioned the company for continued success in the evolving automotive and renewable energy sectors. Alphabet (GOOGL) Alphabet stock daily chart Google, with a staggering market capitalization of $1.6 trillion, stands as one of the most prominent names in the business world. It secures its place among the top five most valuable companies globally and boasts a widely recognized and esteemed brand. Google remains at the forefront of groundbreaking advancements in various technological spheres, including mobile technology, cloud services, data analytics, artificial intelligence (AI), and virtual reality. These innovative developments continue to drive the company's success and shape its competitive edge. Notably, a significant portion of Google's revenue stems from its dominance in internet advertising, a lucrative sector that contributes substantially to its financial performance. The active integration of AI within Google's operations serves as a strong catalyst for the growth of its shares. As AI technology becomes increasingly prevalent, it expands the addressable market for Google, creating new avenues for growth and revenue generation. The global corporate AI market, in which Google actively participates, is projected to experience a remarkable annual growth rate of 34.1% until 2030. This highlights the immense potential and opportunities that lie ahead for Google as it leverages AI capabilities to propel its business forward. With its continuous pursuit of technological innovation and a diversified revenue stream, Google remains a formidable force in the industry, poised for sustained growth and influence in the years to come. Intel (INTC) Intel stock Monthly chart The increasing adoption of artificial intelligence (AI) technology has created a surge in demand for chips, leading to notable market movements for prominent AI chip manufacturers. Both Advanced Micro Devices (AMD) and NVIDIA have experienced significant share price increases since the start of 2023, capitalizing on the growing enthusiasm surrounding AI advancements. In light of this trend, chipmaker Intel is also seeking to position itself as a key player in the AI chip market. Intel has been engaged in negotiations for a strategic initial public offering (IPO) investment with Arm, a renowned British chipmaker. This move follows NVIDIA's previous unsuccessful attempt to acquire Arm. By exploring this potential partnership, Intel aims to solidify its position in the AI chip sector and leverage Arm's expertise and technology to enhance its own capabilities. The negotiations highlight the fierce competition among chipmakers to secure a prominent position in the rapidly expanding AI market. As the race for AI chip dominance intensifies, these developments demonstrate the strategic moves undertaken by major players in the industry to stay ahead in the evolving landscape of AI technology. The outcome of these negotiations will undoubtedly have implications for the future trajectory of the AI chip market and the competitive dynamics among key players such as AMD, NVIDIA, and Intel. Strategies For Investing In A Bull Market If we are indeed in the early stages of a new bull market, it's crucial to have strategies in place to make the most of rising stock prices. Here are four strategies to consider: 1 ) Diversification and Asset Allocation: Review your asset allocation to ensure you have sufficient exposure to stocks to benefit from the bull market. Consider rebalancing your portfolio by reducing your allocation to bonds and cash while increasing your allocation to equities. However, exercise caution and remain aware that market conditions can change rapidly. Don't assume that stocks will only go up from here. Maintain a well-balanced portfolio that includes a mix of stocks, bonds, and cash. If you're uncertain about the ideal mix, the Rule of 110 suggests subtracting your age from 110 to determine the percentage of your portfolio to allocate to stocks. 2 ) Focus on Growth Stocks and Sectors: In a bull market, growth stocks and sectors tend to perform well. Look for innovative companies that leverage technology to create efficiencies or address global challenges. Industries experiencing rapid growth in 2023 include CBD product manufacturing, 3D printing, solar power, and artificial intelligence. Remember that growth stocks offer higher return potential but also come with increased risk compared to more established companies. 3 ) Consider Value Investing: Value stocks are equities that appear undervalued relative to their intrinsic value. They may be trading at lower prices due to investor overreactions or a market environment that favors faster-growing assets. In a strong bull market, value stocks may lag as investors favor growth assets. However, for patient, long-term investors, this presents a buying opportunity. Value stocks often shine during bear markets and may offer dividend payments. Utilize the bull market to increase your holdings of value stocks, which can act as a buffer during the next bear market while providing dividend income. 4 ) Dollar-Cost Averaging: Implement a strategy known as dollar-cost averaging (DCA), where you invest a fixed amount on a regular schedule, regardless of market fluctuations. For example, invest $400 on the same day each month instead of trying to strategically time the market. DCA helps manage the volatility often seen in the early stages of a bull market. By investing consistently, you buy more shares when prices are low and fewer shares when prices are high. This approach lowers your average cost basis over time and minimizes the impact of short-term market fluctuations. Remember that these strategies should be tailored to your individual financial goals, risk tolerance, and time horizon. It's advisable to consult with a financial advisor who can provide personalized guidance before making any significant investment decisions. Risks To Be Aware Of In A Bull Market While bull markets can present favorable opportunities, it's crucial to be aware of potential risks and pitfalls. Here are three significant risks to consider: 1 ) Overconfidence and Speculation: During a bull market, there is a tendency for investors to become overconfident and take on higher levels of risk. This can lead to speculative investing, where investors chase after high-risk, high-reward opportunities. However, when the bull market eventually ends, these speculative investments may experience substantial losses. It's important to maintain a balanced approach to investing and avoid excessive risk-taking, as downturns can permanently impact the outlook for smaller, less established companies. 2 ) Market Bubble: Bull markets can sometimes give rise to market bubbles, where stock prices become significantly detached from their underlying value. This occurs when investors, driven by excessive optimism, push prices to unsustainable levels. While market bubbles can provide opportunities for gains in the short term, they also carry the risk of a sudden correction or crash. Once the bubble bursts, panic can set in, causing a rapid decline in stock prices and the onset of a new bear market. It's essential to remain cautious and be aware of signs of excessive market exuberance. 3 ) Impact of Interest Rates and Inflation: The interplay between interest rates, inflation, and economic conditions can influence the trajectory of a bull market. Changes in interest rates by central banks, such as the Federal Reserve, can impact borrowing costs and corporate profitability. Additionally, shifts in inflation levels can affect consumer spending power and overall economic growth. Uncertainties regarding future interest rate hikes or spikes in inflation can introduce volatility and potentially dampen or reverse a bull market. It's important to monitor economic indicators and the actions of central banks to gauge their potential impact on market conditions. It's worth noting that predicting the specific outcomes of these factors in the coming months or years is challenging. The key is to remain vigilant, maintain a diversified portfolio, and consider the long-term perspective when making investment decisions. Consulting with a financial advisor can provide valuable guidance in navigating the risks associated with a bull market. Tips For Benefitiing From A Bull Market To successfully navigate a bull market and maximize your investment potential, it's important to consider the following strategies: 1 ) Stay Disciplined: Maintaining discipline is crucial in avoiding excessive risk-taking and speculative behavior. Define your investing parameters and process, and stick to them. Establish clear criteria for the types of investments you're willing to make and the level of risk you're comfortable with. Evaluate any exceptions carefully and have a clear exit plan for more speculative assets. By staying disciplined, you can mitigate the risks associated with overaggressive investing and ensure a more measured approach to capitalizing on the bull market. 2 ) Think Long-Term: Adopting a long-term perspective is key to protecting your investments from short-term market fluctuations and potential downturns. While it can be tempting to make impulsive decisions based on short-term market movements, it's important to focus on your long-term financial goals. Allocate a portion of your portfolio to cash reserves to cover emergencies or major purchases, so you don't need to tap into your investment accounts during market volatility. This long-term outlook allows you to weather market cycles and take advantage of opportunities that may arise, while also providing stability and peace of mind. 3 ) Rebalance Regularly: Bull markets can lead to overexposure to stocks as their value appreciates. Regularly rebalancing your portfolio helps maintain your desired asset allocation. For example, if your target allocation is 70% equities and 30% bonds and cash, and stocks have outperformed, your allocation may shift to 75% stocks and 25% bonds and cash. By periodically selling stocks and purchasing bonds, you can restore your desired asset allocation and lock in some profits from the bull market. Rebalancing also helps manage risk by ensuring that your portfolio remains aligned with your risk tolerance and investment objectives. 4 ) Seek Professional Advice: Each individual's financial situation is unique, and it's important to consider your circumstances when implementing investment strategies. Regularly review your investment plan and consult with a financial professional to ensure it remains aligned with your goals and risk tolerance. A financial advisor can provide personalized guidance based on your specific situation, help you navigate market trends, and offer insights on potential investment opportunities. They can also assist in assessing the performance of your portfolio and making adjustments as needed. By following these strategies, you can position yourself to make informed investment decisions, manage risk, and capitalize on the opportunities presented by a bull market. However, it's important to remember that investing involves inherent risks, and past performance is not indicative of future results. Stay informed, monitor market conditions, and be prepared to adjust your strategies as needed. Conclusion: As the bull market gains momentum, it is essential for investors to be well-prepared and make informed decisions. Employing various strategies such as diversification and asset allocation, emphasizing growth stocks and sectors, considering value investing, and implementing dollar-cost averaging can significantly enhance one's ability to navigate the market effectively. Nevertheless, it is crucial to remain cautious of potential risks, including overconfidence, market bubbles, and the influence of interest rates and inflation. To maximize gains during the bull market while minimizing potential risks, it is vital to maintain discipline, adopt a long-term perspective, regularly rebalance portfolios, and seek professional advice. It is important to note that individual circumstances vary, thus investment strategies should be tailored to align with personal financial goals and risk tolerance.
Education
by FOREXN1
14
The Struggle of Consistency: Navigating DCA in Crypto InvestingHello dear @TradingView community! Today let’s focus on what is Dollar Cost Averaging ? Determining the optimal moment to buy cryptocurrency is often a challenging task due to the high volatility of crypto assets. Prices can fluctuate unpredictably at any given time, leading traders to experience the fear of missing out (FOMO). This fear is commonly felt when the price of a cryptocurrency, such as Bitcoin (BTC), suddenly surges or plunges. During price drops, individuals tend to panic and sell their holdings in a frantic attempt to avoid further losses. Conversely, when prices rise, panic ensues as people worry they don't possess enough coins to sell. As evident, making decisions to buy or sell cryptocurrencies is no easy feat. However, if you seek long-term financial gains from cryptocurrencies without succumbing to the anxiety caused by every price spike, it would be wise to consider the Dollar Cost Averaging (DCA) strategy. Let's delve deeper into what DCA entails and how it functions in the realm of cryptocurrencies. What is Dollar Cost Averaging? Dollar cost averaging is an investment strategy where fixed amounts are regularly invested at consistent intervals, in contrast to a one-time lump sum investment. This approach involves executing transactions regardless of the asset's current price or market fluctuations. It is highly favored by investors and management funds seeking long-term profits from various assets like ETFs, commodities, cryptocurrencies, stocks, and more. How does DCA work? To employ the DCA strategy, you first determine the amount of cryptocurrency you wish to invest. In conventional investing, one would typically invest the entire designated sum in a specific asset. However, with DCA, you invest fixed amounts of USD into Bitcoin or any other asset over a designated period. For instance, you may choose to purchase $100 worth of BTC every month for a 10 year period. When utilizing DCA, the selection of the cryptocurrency becomes crucial. With around 22,904 cryptocurrencies available today, you must pick a coin you believe will appreciate in value and yield profitable returns. You can even choose an ETF which follows the trend (up or down) for any specific asset or basket of assets. To comprehend how DCA operates, consider the following example: Let's assume it is June of 2014, and Katie decides to allocate $10,000 in BTC. In June of 2014, the price of Bitcoin stood at approximately $560 per coin. Instead of investing the entire sum at once, Katie opts for dollar cost averaging throughout the 9 years. From June 2014 to May 2022, Katie spent $100 each month on BTC, disregarding market price fluctuations. After 8 years, she spends almost $9,600 and her earnings reflect the following: The green line in the chart represents Katie’s total investment amount, while the orange line depicts the fluctuation of portfolio size value over the 9-year period. When Katie initiated his investments, both the cost of BTC and his investments were approximately $100. However, as time progressed, the price of Bitcoin underwent changes. By May of 2022, Katie's $9,600 investment had grown to $287,518 worth of BTC, showcasing a growth rate of 2,895%. With maximum gain of $631,540 at bitcoin ATH. Online DCA tools are also available to estimate the earnings from purchasing bitcoins over several months. For example, platforms like dcaBTC enable users to customize their DCA strategy according to their preferences, specifying the amount to purchase, investment frequency, and duration. To successfully implement dollar-cost averaging (DCA) in Bitcoin investing, several key steps need to be followed. These steps involve setting a budget, choosing a reputable cryptocurrency exchange, establishing recurring purchases or utilizing recurring purchases and automated investment platforms (such as Binance, Coinbase, Kraken, Crypto.com or even at Vestinda), and monitoring and adjusting the strategy as necessary. Pros and Cons of Dollar Cost Averaging Let's commence with the pros of dollar cost averaging. By making regular and consistent purchases over time, you mitigate the risk associated with poorly timed lump sum investments. Additionally, since you make regular purchases, you alleviate the fear of missing out and impulsive decision-making prompted by price fluctuations. Cryptocurrency exchanges and platforms charge transaction fees for every trade. While one might assume that DCA would result in higher commission fees, it is essential to remember that this is a long-term strategy. The commission costs are negligible compared to the potential profits that can be realized over several years. Moreover, DCA does not necessitate substantial investments. This strategy involves smaller and consistent purchases, eliminating the need to determine how best to deploy a large sum in one go. Furthermore, if prices suddenly drop at the time of purchase, you can acquire the cryptocurrency at a lower price. However, it is important to note that if the cryptocurrency's price is bullish, you may end up buying at a higher price. This is particularly relevant when dealing with BTC or any chosen cryptocurrency. Many crypto enthusiasts and investors prefer to purchase a significant amount at once, fearing a subsequent price surge in the hours, days, weeks, or months to come. As previously mentioned, with the DCA strategy, you purchase small amounts at regular intervals, regardless of market stability. Should you utilize the DCA Strategy? DCA facilitates maximizing profits with relatively low risk. Although this approach is not devoid of drawbacks, it offers numerous advantages that can be leveraged to your benefit. Hence, is DCA worth your time and money? As always, we recommend thoroughly studying all available information before making any decisions. Save this article to your browser bookmarks for easy reference in the future. Happy trading!
Editors' picks
Education
by Vestinda
11
🚩How to identify the bottom and BUY the crypto in time? 3 tips!🌟How to BUY crypto in time and with the possible highest RETURN? The correct answer is during the capitulations. 🎯Capitulation is when even patient and experienced traders start to panic, but this is the opportunity time (Jan 2015, Nov 2018, Mar 2020, May 2021). 🔶How to buy crypto during the capitulations? Use the dollar cost average (DCA) strategy. This strategy allows you to buy crypto by parts without risking all of your capital. 🔶How to use DCA strategy? This strategy helps to average the BUY price. You can only sell at the top and buy at the bottom by accident. In real life, this strategy helps to average the buy price of a crypto. For example, back in 2019, you bought Bitcoin 3 times at $3,000, $4,000, and $5,000. The average purchase price in this case is $4,000. If the price go lower, you would average the price, if it rose, you already bought at a good price. Also, you can BUY at the weekly candle close during the capitulions. It is important to use the equal parts of the capital to buy (1/10, 1/20 etc.). Another simple example is shown on the chart😉 🔶How you can identify a capitulation? 1. Look at the volumes and record liquidations as shown on the chart. The liquidation of 50-100k Bitcoins is the best indicator. 2. Look at the percentage of drop from the highs. Historically, a price drop by 65-80% has been the bottom of the market. 3. Use the indicators that show the bottom of the market. Read this idea about the 🔋Greenwich indicator. It shows both the top and bottom of the market. So when BUY signals (green diamonds) appear, you can use this indicator to buy crypto by parts. 🔶Why does the DCA strategy work? Bitcoin, like U.S. stock markets, is in a long-term Uptrend. After buying Bitcoin in 2017 at its ATH ($18-19k), investors are now still at +100% profit. And as long as this trend is not broken this strategy will work. For example, the U.S. stock market has been in uptrend for over 80-90 years. 💻Please write in the comments if you still have questions about the DCA strategy or how else you can identify the bottom. What methods do you use for that? 🎇 Press the "like"👍 button, write comments and share with your friends - it will be the best THANK YOU. P.S. Personally, I open an entry if the price shows it according to my strategy. Always do your analysis before making a trade.
BITSTAMP:BTCUSDEducation
by Yuriy_Bishko
33
3 Ways To Invest In Crypto Market WITHOUT Education 💡You got a busy life and you don't have time to research and learn about thousands of cryptos, Or you maybe don't see yourself and your life a trader, Maybe aren't even interested in capital market. You just heard Crypto Market is gaining a lot of profit and you just don't want to miss it.. You know what?? You hear from a Shit Coin.. You buy some.. And You will lose most of or maybe all your money .. This IDEA will guide you through this situation, it will let you know how to invest successfully (probably), in crypto market. I tried to minimize the risk for you.. SHALL WE BEGIN??? There are three possible ways, the First one will cost you money, the Second and the Third are free of charge. FIRST: Go to an expert consultant. The only thing you need to do, is to research and find suitable expert consultant for yourself. After that everything is done. He/She, will gather some of your personal information to know you better to arrange a personal crypto portfolio.. This type of portfolio is uniquely designed for you and your personal goals.. And of course this way will cost you money due the type of expert you find. SECOND: Bitcoin & Ethereum. Clear your mind from whatever exciting coin and token you hearing all around the social media or you friends.. Bitcoin and Ethereum are the King and the Queen of the market, AND NOTHING ELSE MATTERS... Try to calculate how much money can you HOLD or HODL for at least 5 YEARS . Buy Bitcoin/Ethereum with that money and store it in a safe place and just don't think about it anymore until that 5 year deadline comes up. I believe you will be surprised when you see the outcome of your investment. And don't remember that at least 5 year is so important. free of charge this one. THIRD AND LAST: DCA, Dollar-Cost Averaging. Did you remember older members of the family always told us, don't spend all your income. Put some of your income into the bank, monthly. It'll come handy some day. Dollar Cost Averaging is something like that, and you know what?? It will work perfectly on Cryptos. The only thing you need to do, is to calculate you monthly costs and income. After that promise something to yourself, I WILL SAVE SOME OF MY INCOME INTO CRYPTO EVERY MONTH. It can be %5, %10, %15,... whatever number you and your life feel comfortable with. This DCA needs Three situations for you to concentrate on. First , You should keep your promise and buy crypto every month no matter what happens. Second , you should again wait at least 5 years . But don't worry the results will make you satisfied. And Third , Just buy Bitcoin or Ethereum again and nothing else. Don't remember The KING and The QUEEN. Why it is called AVERAGING??? because, no matter what is the price your filling your bag every month, so you will buy bitcoin in the deep, in the middle and in the top. This way you will buy your asset in an average price, without even knowing anything from the market. This one was free of charge too, and I believe from bottom of my heart you will be excited from the result.. This is it.. I hope you enjoyed this IDEA.. If you did so, push the LIKE button and feel free to talk to me in comment section :)
BITSTAMP:BTCUSDEducation
by ArshiaZojaji
2
When to enter? Does it even matter?With value investing everyone knows: Buy when there is blood in the street, when a good company has a P/E ratio of maybe under 10. But with currencies, other than the advice "50% to 61.8% fib" and a whole lot of troll "buy every bottom sell every top with the magic indicator or magic drawing on the chart" there is no common knowledge. We can look at this recent example where the price dropped, went sideways, and then dropped hard. We could keep looking at winning examples when selling or buying at the top of these bands or ~61.8% retracement The only way to know how good they are is by backtesting a large number and writing down the stats. But are there other ways to enter? Rather than write an entire novel with chapters I will simply go through a list of screenshots Some say it doesn't matter where you enter... It does and it doesn't, depends what you mean by that. First Second Third Fourth Fifth Sixth Seventh Eight Ninth Final This is all simplified to make my point, or points I guess. So you can't just say "entry doesn't matter". People that tried trading, failed, got into "holy grail" safe good boy passive S&P in the last 70 years averaged bla bla bla wake me up, they're the ones saying this. Oh so it does not matter if they buy a stock at a P/E of 8 or 280? Of course it matters!!! Entry matters! BUT where you enter EXACTLY does not matter. I'm not sure how to put it, but go through the examples and you see what I mean. Sometimes it matters, but even if you miss it there are other ones, and these entries are going to be at least a small area "of opportunity" anyway. Well it's more complicated than a "yes" or "no". There are plenty of ifs. And plenty of ways to approach this. Look, Warren Buffett bought too early or later and sold too early all the time. And? Most famous investor in the world. Is there an optimal super entry that gives better results than anything else? Statistically there has to be one, so yes. If we spend ages making stats and we find it do we know it will remain this particular one? Probably not... Can we find it without it just being hindsight bias? Probably not... Would having the mighty perfect entry (I didn't say find every exact bottom, that's not actually possible) make a big difference to our results? Lol you might go from 20% returns to 20.5%. Probably even less. The endless search for the holy entry newbs seem to all be obsessed with... Fool game. It's same as with video games, Starcraft, Lol, Dota, W3. Or chess... Newbs go "I will farm for 40 minutes full eco ignore military, full Nasus q, full catch his pawns, I'll be a monster and they'll see", 15 minutes later "Ok tough guy just wait late game you will feel sorry", 5 minutes later "Victory!" or "GG easy noob", 1 minute later "Report Nasus useless afk trash ebay account". Haha I laugh every time. They really make all the same type of newbie "late game" and "magnet logic" mistakes, 80% of retail FX goes into "day trading" because "hey I figured out I'll get more trades and therefore grow my account faster duh", "Hey you can't lose if you don't sell", "Hey I have this brilliant martingale average down", "Hey wassup wassup wassup I found a trick", "hey if I go for lots and lots of little wins, take my profit fast I'll win small but very often and scale", "hey if I run conservative robots that only return 1% but I run 500 of them...", "hey if I add all these conditions". What a circus. Miss the good old days. Can't humiliate noobs with trading their account is secret, they open their mouths when they get lucky then vanish, and it's not a 1 v 1 or 3 v 3 or whatever it's a 1 v whole market. Even if we cooperate and share ideas it's still a 10 v 10 million or idk. There is however the "bull vs bear" thing. But the Bitcoin bulls from 2018 from 15k to 3k almost all left (losers) and the few ones that stayed pretend they won (or they're too dumb to figure out they were on the wrong side of the market). S&P 500 bear tears are pretty delicious at the moment by the way. You both can say entry matters and entry doesn't matter and be mostly right. Don't waste too much time trying to perfect it. Calculating max risk, probabilities of drawdown, when to exit, when to hold, when to add, how to trail, correlations, those are at least as important as the entry. What I can say is entering very early, far from the stop, out of fear of missing out is bad, and entering very late for a giant risk to reward is greedy and bad. Around 50% retracement is often a good compromise. Stats will help choosing areas and price action (stats such as: over the past 10 years on breakouts would it work out to enter in the big red candle? How about on the previous low? How about 61% fib when the price reacts near the previous low? Etc). Entry doesn't go alone, for example when you average in a sideways within a trend well you'll want to move your stop each time you add according to your average price. That's a whole other subject. Coming up with a whole strategy even simple and even once you sort of understand the markets and have the basics of price action is still clearly going to take a couple hundred hours at best... Just writing this took me a little over 2 hours, and I rushed it, and I obviously don't start from scratch I researched all of this. Just writing an intro like this about entries and stops and targets and trends and pullbacks and breakouts and timeframes and risk and all the other stuff, not even with stats, that alone probably would take 100 hours by itself. How long it takes to convince yourself to hold winners and cut losers and quit a gambler mentality however = infinite time, just quit now you'll save time (thousands of hours!), investing is not for you. Oh and finally, an entry "signal" is a joke. You don't go from 0 to 100 "wow this would be a great buy because of this entry", that's beyond ridiculous. You are supposed to be watching something before getting in and waiting on certain conditions to enter (pullback after breakout), never heard of anyone that had "entry signals". When George Soros went short the GBP it was "because of the entry" but he had a whole theory. The "entry" wasn't a magical signal it's simply he was close to the floor, well ceiling, and had a big RR with big odds! And he explains how "I was selling weeks before", he actually "dollar cost averaged" as I explained. He didn't wait for a certain magical point, he wasn't greedy waiting for a 1 pip stop.
Education
by MrRenev
9
Mitigating High Risk Long Positions with CoveringStop losses are an, often unwelcome, but ultimately necessary and life saving tactic to day trading. When going long, setting a high stop loss can be beneficial for getting out of bad trades quickly with small losses, and opening yourself up up more opportunities for good trades. Setting a low stop loss on the other hand, can be beneficial by greatly increasing your profit. Many trades that seem bad initially end up rallying and turning profitable. Generally speaking, the lower your stop loss, the higher your percentage of good trades. The downside to a low stop loss of course is that trades take longer, locking your funds up, and what if price actually hits your super low stop loss? You've lost a super amount of money. In my trading career so far, I've preferred a low stop loss. Losing out on a good trade due to a conservative stop loss is more painful to me than the risk presented by a liberal one. But this is a high risk to accept. Losing, say, 20% of my trading capital is definitely something I want to avoid, but not at the cost of a high stop loss. So, I can hedge my position, mitigate my risk, in one of a few ways. I can open a short position when I see my long position go south. Or I can engage in Dollar Cost Averaging: I buy more as the price falls to lower my average position size and ultimately my target profit. These are good options, but come with their own side effects. Opening a short position opens you up to risks associated with a short position, i.e. price suddenly shoots up. And Dollar Cost Averaging requires additional funds to keep buying. What else can I do? Enter "Covering". From Investopedia: "To cover is to take a defensive action to lower the risk exposure of a position" The graph attached here is a demonstration of Covering (the exact spots for buying/selling were picked hastily; this example is purely conceptual and an ideal situation). The basic idea is: when price begins to fall, sell it, just like a stop loss. However, unlike a stop loss, the intention is to buy back in at a lower price when price begins to rise again. This is like dollar cost averaging, because you're, in a sense, lowering your average position size. The difference is you don't need additional funds. This is also like short selling, because you rely on the price continuing to fall, but you haven't borrowed anything in order to benefit from this fall. As you can see in the diagram, as you sell and buy back, the amount of shares/coins/whatever you can afford off your initial capital increases, thus either increasing your profit if the trade hits the profit target, or decreasing your losses if the trade hits your actual stop loss. Here's how Ive been setting up my covers: When price begins to fall, I set a conditional market sell somewhere below the nearest support. If price falls to this level, I immediately sell everything Once I've sold all my shares, I set a trailing stop loss for the cover; I generally do ~1.2%. If, after I sell, price rises 1.2%, I buy back as many shares as I can with the money I got from selling earlier. Ideally, this trailing stop falls well below where I sold. Rinse and repeat until price either hits your original take profit or your original stop loss. Some things to note. Do not buy below your original stop loss! The purpose of this strategy is to respect your original decision, not make new ones . This is meant to mitigate a high risk situation, don't expose yourself to more risk in doing so. Also, you theoretically want to buy back above your original stop loss, even if it looks like it's going to fall through. Make your own call here, but by not buying back, you've essentially just changed where your original stop loss is, and thus changed your original trade decision. Of course, nothing is without its own risks. It's quite possible that you get stopped out for a loss every time you sell, i.e. you sold, price went up, so you buy back at a higher price to stay in the trade. This will eat into your profit if the profit target is eventually hit, or simply add to your losses if the stop loss is hit. From my point of view, that risk is less painful than the risk of hitting a low stop loss without covering. You theoretically give yourself more chances of being right with these micro trades inside of your larger trade, and if you get lucky, as is the case in my diagram, you might actually profit even if your original stop loss is hit. This strategy requires attention, for sure, but if you're both strategic and lucky, you can really save yourself from the downsides of a high risk trade without adding money to the pool, or exposing yourself to short selling risk.
COINBASE:COMPUSDEducation
by tapRoot_coding
1
Bitcoin - DCA - The best strategy for most In this publication, I want to make a case for Dollar Cost Averaging (DCA) and explain why for most traders, it is by far the most profitable strategy. Rather than buying and selling BTC whenever you see a potential top or bottom, or trade with leverage. Let's travel back in time to the end of 2017, everybody is talking about bitcoin and this is how you heard about it. You get very excited about it, but you don't want to analyse markets, you want to invest in this coin because you believe it has a promising future. So you decide that you will put 100$ in it every month on the first day of the month and not look back, starting on Jan 1st 2018, pretty much at the top of BTC price. Bitcoin starts its decline, hovering some time around 6000 USD/BTC, but you keep investing, because you are smart and understand that you will get even more sats (1/100.000.000 BTC) for your dollar. More bang for the buck as it were. You just stick to your 100S/month investment plan, even through the dip to the 3500$/BTC lows in Jan/Feb 2019. So how much BTC would you have by now, how much would you have invested and how much would it be worth after (almost) 3 years ... In other words, what is your ROI ? Total investment : 3600 USD Total BTC accumulated : 0.48910342 Current Value : 13450 (BTC price of 27500 USD/BTC) ROI : 274% So, even though you started buying BTC, pretty much at the previous top, you still managed to get a return of 274% over a 3 year period. Now, tell me how many actively trading people will have made that return, even with leverage ? Q : Is it too late starting to invest 100$/month in BTC now that we have reached current prices ? A : Keeping in mind the current demand for BTC, mainly from institutional investors, the future for BTC is looking bright, and chances are that we'll even exceed those 274% in 3 years. The S2F and S2Fx models from PlanB predict a bitcoin price of somewhere between 100.000 and 288.000 USD/BTC by the end of 2024. Worth investing 100$/month ? Please note that this is not financial advice, do your own research and only invest money that you can afford to lose. Keep in mind that past performance is no guarantee for the future. Thanks for sharing your thoughts in the comments below, and if you found this useful, give it a like. Hope to see you back soon. Happy New Year and all the best wishes for 2021 and beyond!
Editors' picks
BNC:BLXEducation
by Nico.Muselle
82
Investing for Beginners 101 - The power of Dollar Cost AveragingInvesting for Beginners 101 --------------------------- How do you build your investment fund? ---------------------------------------- There is no silver bullet to it, and it is easy when you build it across an extended period of time. Introducing the power of Dollar-Cost Averaging (DCA)! One of the easiest ways to get started. DCA is an investment strategy in which you purchase an asset over an extended period of time, to average in at a good price while avoiding the volatility of the market. This strategy proved to be quite effective for both novice and experienced investors. How do you do it? Let’s start with the easiest strategy. Example 1: ----------- Let’s say you want to invest 1000$ in bitcoin in one month, and you want to scale in twice per week, on Wednesday (W) and Friday (F). What you would do is divide the 1000$ by 8 (2 times per week over 4 weeks), and you would purchase 125$ on Wednesday and Friday. You’ll end up with 1000$ worth of BTC by the end of the month. Easy? Here’s another example. Example 2: ----------- You want to invest 1000$ in bitcoin for one month period, and you want to purchase daily: You end up splitting 1000$ by 30, and you’d purchase 33$ every day until the end. The trick here is finding the most optimal strategy, and calculating your average price. DCA aims to avoid making the mistake of making one lump-sum investment that is poorly timed with regard to asset pricing Investopedia. There are multiple strategies for DCA’ing into an asset. One way I do it is the following: After every successful trade, I invest 20% of the profits in both #Bitcoin or #Ethereum (equal split) and transfer another 10% $USDT over to my fund. Why is DCA effective? ----------------------- It removes the burden of buying at an optimal price and averages your whole purchases. Here’s a real example of how I did it at some point. I purchased on average 24$ worth of $BTC daily in the 9000-9400 range. Now notice that the average price I scaled in: 9175. While the price reached as high as 9400. Instead of purchasing 1 bitcoin at 13K for example, think how much you would save if you invested while the price fluctuates with time between 11K and 13K. That’s a lot. DCA works best when the price will eventually rise in the future. And you can truly reap its benefits on a macro scale. One last note, you do not trade with your investment fund. It’s best to leave it for years to come, and DCA’ing over multiple years into an asset that will increase in price in the next 10 years is the surest way to maximize your exposure to it. Hope you enjoyed this thread! Until next time 🙂
Editors' picks
Education
by DarkMatter_CO
16
Bulletproof Dollar Cost Averaging Investing Explained.Dollar cost averaging. You probably heard about this strategy, but what does it mean in practice? And which type of dollar cost averaging strategy is the best? In practice it means buying Bitcoin, stocks, commodity and so on every week or month at the monday, sunday, at the start of the month or at the end, not caring about the price. You can also choose one random day in a month , when you make your purchase, more about that maybe in another Idea. An example of dollar cost averaging can be found below backtests. In this test I've compared buying Bitcoin at - weekly opens (Monday open) eg. 06 Jan 2020 Average buy price in 2020 - $9,255 - weekly closes (Sunday Close) eg. 12 Jan 2020 Average buy price in 2020 - $9,361 So buying at the weekly close or at weekly open are both a good idea, but buying at open each week has a bigger return of investment than buying on close by 2%. - monthly opens (First day in the month) eg. 01 Jan 2020 Average buy price in 2020 - $9,245 - monthly closes (Last day in the month) eg. 31 Jan 2020 Average buy price in 2020 - $9,827 Here we can see a bigger difference , while buying Bitcoin at open would gave you average price per BTC of $9,245, Buying at close would make your average buy $600 more expensive, 8% smaller yield. To see if this trend also occurs in the last year, I've calculated also a year 2019 with monthly values. It turns out, buying on open is here cheaper again, while buying Open would give an average of $7,022. Buying at close would make average buy of $7,287, small difference but very noticeable in long term. Example I. I am starting to buy Bitcoin for 15% of my gross monthly income (let's say 500$ ) from first january at weekly open starting from 01 January until today . How much would I have today? Average buying price - $9,255 Current Bitcoin price - $13,180 Yield - 13180/9255 = 1,424 = 42,4% Deposits - 42 per $500 = $21,000 in past value Value = 21000 x 1,424= $29,904 in current value Buying this year at open would give a very slight 0,1% increase in yield, so both buying at weekly open or monthly open is a good idea, maybe another time I can cover some random days in a month! This strategy also works for stocks, commodities and etc. IF you like my explanation, let me know by hitting that agree button or support me by some nice comment! Cheers, Tibor.
BITSTAMP:BTCUSDEducation
by TiborVrbovsky
3
Dollar Cost AveragingWith the markets getting banged up earlier this year, you have a LOT of opinions being thrown around on the best way to passively invest in the stock market. Because of this “Dollar Cost Averaging” has been making its way around the internet again as the best thing since sliced bread…but does it actually work long term? So in this article, I’m going to cover: What is it? Should you use Dollar Cost Averaging? Does it make sense? Is this a good strategy? Or is Dollar Cost Averaging not so good…and just plain stupid? So let’s dive into some examples to see if Dollar Cost Averaging is all it has been hyped up to be. What Does Dollar Cost Averaging Mean? The first time I remember hearing about it was in the ’90s where the market were basically just going straight up. Around that time financial planners recommended it because, at that time, you could basically close your eyes and buy, and within a few months you would have made money. They would suggest that at the same time every month you would purchase a particular stock or stocks, no matter what it or the rest of the market was doing. Example: Apple Let’s take a look at and example using Apple (AAPL) . This morning I went back over the past 17 months, so from January 1st, 2019, and I looked at the price of Apple at the beginning of the month. So the idea here is that you would invest $1,000 a month into AAPL shares. Let’s go through a few months and see how it performs, starting with January 1, 2019. At that time, AAPL was trading at $154.89/share. With my $1,000, I could have purchased 6 shares, costing me $929.34. Onto to February, AAPL is now trading slightly higher at $166.96. This time around you’re only able to purchase 5 shares with the price of the stock now higher. If you would buy 6 shares, you would invest more than $1,000. The rules for Dollar Cost Averaging is that you have a maximum amount that you stay below. So now you have bought 6 shares for $154, and 5 shares for $166. This means that you now have 11 shares and the average price is $160. The idea here is that you keep doing this every month, and you see your average price changes. If you continue to do this for 17 months, you would have accumulated a total of 69 shares. And over these 17 months, you would have invested around $15,000 to be exact, $14,998. So the idea here is that you invest a fixed amount every month. Now let’s take a look at an Apple chart really quick here and see what has happened since January 1st, 2019. Right here, I marked it in green. As you can see, Apple has been consistently going up, until it was hit by the pandemic but has since recovered and is going nicely up. So what does this mean for your 69 shares that you would have accumulated over the past 17 months? Well, 69 shares, and the current price right now of Apple is $317. This means the current value of your 69 shares is $21,934, which means that you would have made a profit of around $7,000. If you express this in percent, it would be a gain of 46% over this past 17 months or 33% per year. Not too bad. So Does Dollar Cost Averaging Make Sense? Based on this example, it seems that Dollar Cost Averaging is a pretty good idea where you are investing a fixed amount regardless of what the price is. The main concept or idea here is really to make trading or investing as easy as possible for everybody by not worrying about the stock price. But…is it really a good idea? More Dollar Cost Averaging Examples I chose two more stocks, that I’m sure you’ve heard of before and one somewhat special for me since I used to work for them: IBM IBM is a household name, their stock in the Dow, so I think most would agree they’re a solid company worth investing in, right? I can remember back in the day when everyone (including your barber) was telling you to invest in names like IBM and AT&T. So these are the two stocks that I want to look at right now. Example – IBM On January 1st, 2019 IBM was trading at $112.01, so we could buy 8 shares and invest a total of $896. If you were to look at the chart, you will see IBM’s price fluctuated between $112 to $134, and went all the way up to $140. Now we’re following the exact same principle that we did with Apple where we’re buying shares for $1,000 always on the first of the month regardless of the price. Therefore we are adjusting the number of shares. So after a year, we would have accumulated 120 shares with an average price of $132. So after a year we would have invested $15,919 into IBM. Now as of today, today is May 21st, 2020, the current price of IBM is $120. So let’s take a look at the charts before we come back to the results. So we’re looking at IBM and we are doing the exact same strategy that we did with Apple. We start on January 1st, 2019, and every month we are investing a fixed amount. As you can see, IBM has not been going up as nicely as Apple. This is exactly the problem, if you look now at the Dollar Cost Averaging, we see that over these past 17 months we would have actually lost $1,500. That’s a loss of 10% over 17 months or 7% a year. So what does this mean? Is Dollar Cost Averaging a good idea or not? Before I answer that question, let’s take a look at one more example. Example – AT&T Over the years everyone has said, “Invest in AT&T . This is what grandma did,” right? Didn’t grandma invest in AT&T and hold the stock forever? So I thought let’s use this as an example. Now, since AT&T is trading at a much lower price, we can afford to buy more shares. After the course of 17 months, we would have 405 shares, and we would have invested around $16,800. Let’s take a look at a chart and see what AT&T did over the past year and a half. Very similar to IBM, a little bit better, AT&T was going up until the pandemic hit. As of today, May 21st, they still seem to be hurt. So what does this mean for the Dollar Cost Averaging? If we look at the current price of $29.64, the current value is almost $15,000. We did invest almost $17,000 so we are sitting on a loss of $1,842. This is 11% down over 17 months, or 8% down over the past year. Is Dollar Cost Averaging A Good Strategy? What does all of this mean? Dollar Cost Averaging is a concept that comes from the 90s and this is when the markets were just going up-up-up. Right now we are coming out of the longest bull market in history. It has been steadily going for 11 years, so it should actually work like a charm. The critical part, the absolute key for Dollar Cost Averaging to work is to pick a stock like Apple that is constantly going up. And, hey, can you ever really be sure that you’re picking the right stock? Recap I personally think that Dollar Cost Averaging is kind of a stupid concept, even though it is super simple. I believe if you put a little bit of effort into learning how to trade, that you can run circles around the market. Because even if you look back at our example of Apple, we see that we made 33% per year. The way I personally trade, I only spend maybe 15 minutes a day trading and my goal is to make at least 60%. Recently, I traded an account and almost doubled it in two months. Right now, I’m trading another account where I’m planning to make at least 10% per month. With a little bit of effort, I believe that you can run circles around Dollar Cost Averaging. I highly recommend that you learn more about how to trade and don’t fall for the simple kindergarten principle here that is Dollar Cost Averaging. Anyhow, this is my take. Now you have some real-life examples and can decide whether this makes sense for you or not.
Editors' picks
NASDAQ:AAPLEducation
by rockwelltrading
25
Risk Management: Satefy Orders (Dollar Cost Average)I believe risk management is key, because sometimes, finding the perfect entry will not be enough. The market is what it is, and nobody can predict with 100% accuracy how the price will behave, even with all the great indicators we got out there. With that in mind, we should come prepared that the price will go against you, and we should take advantage of it, because most of the time it will bounce back up. This technique is especially useful in trading low timeframe also known as Scalping. The idea is to lower the inital entry order size , and split the remaining order size progressively through the safety orders as the price goes against you. This will make the total trade average entry - or break even - at a lower place than if you were simply trading the initial entry. That means the take profit will also be lower, because we can now take profit from the total order size/volume . Here is a simple example with a long: We buy in on the `LONG` label with 10% of our trade capital at around 9325$. Our take profit is 1.3% which makes a 9447$ target. But the price goes down, until it reaches our first safety order trigger line, at around 9231$. At this point we add 10% of our trade capital. It is the `DCA` label on chart. The break even line is now in the middle of the inital entry price and the safety order price, around 9275$. We still have our 1.3% take profit target, but it is now at 9396$ instead of 9325$. At last, the price bounces back up, as expected, and we take profit. Example with a short with 2 satefy orders: What are the risks? In the worst case scenario , which we know will happen at some point, the price does not go back up. It is important to know what are the risks so that we do no get liquidated or lose too much of our account. Let's dive into the numbers. We set up our strategy so that we have 3 satefy orders max, and the stop loss is on step below the last one. That makes 4 entries in total, and we decide to use 1% of our capital on each entry. Each step is seperated by 1% of the price to make things easier. When we hit stop loss, how many % do we lose? 1. On first safety order, price is down 1% and we traded 1%. That's 1% drawdown. 2. On second safety order, price is now down 2% for 1% of our order, and 1% for the other 1%. That is 1.5% drawdown. 3. Of the third safety order, we get 3% + 2 % + 1% = 6%/3 = 2% drawdown. 4. On stop loss, we get 4% + 3% + 2% + 1% = 10%/4 = 2.5% drawdown. => The price went down 4% but we only lost 2.5% of our inital capital. That is why we can say that safety orders reduce risk . /!\ Using leverage will multiply the risk. Using 2x we would have lost 5%. This can climb very fast, so be careful. One thing we can do when a stop loss is hit is to reverse our order, as most of the time our stop loss is hit because the trend is reversing. But again, be careful as it could cost you double.
BITMEX:BTCUSD.PEducation
by cyatophilum
5
How to interpret the results of my Dollar Cost Average indicatorGood morning to the US, Good afternoon to the EU, and Good night to ASIA This post has 2 purposes. 1) Showing you with the video below how to use my indicator Dollar-Cost-Average-Data-Window-Edition/ 2) Collect your likes and move up in the Pine scripters ranking (no shame) Let's start with the first goal here Here's a quick reminder of what's the Dollar Cost Average investment/trading method Dollar-Cost Averaging is a strategy that allows an investor to buy the same dollar amount of an investment on regular intervals. The purchases occur regardless of the asset's price. My Dollar Cost Average (DCA) indicator will analyse for the defined date range, how the DCA method would have performed vs investing all the hard earnt money at the beginning If you missed the video above, here's the link again Dollar-Cost-Average-Data-Window-Edition/ (Yes people ask me info that are on the description, screenshots, videos so please don't take it personally if I repeat myself a bit, trying to get my inbox empty by the end of day and receiving loads of questions already answered won't help :p) The DCA performance versus Your trading performance Full disclosure here before going further ..... it's not because a DCA methodology worked in the past that it's guaranteed to work in the future. Otherwise, trading will be too easy and we''ll be all multi-millionaires But as we say often that the "trend is your friend", dollar cost averaging on a bullish market in a daily/weekly/timeframe is often (but not always) a way to make a decent amount of money To be honest, most of my friends who dollar cost average are making much more than many of my traders friends who're staying hours per day in front of the chart. They take less trades but they're consistent with their method. DCA allows to reduce the stress of trading, the stress of chosing the right moment, the right news and the right crypto animal twitter accounts to follow. A day trader, is more likely to commit mistakes in my opinion. This is certainly not because you take more trades that you'll have a better performance and I hope my tool will highlight it for you. Taking more trades increase the risk of losing as each trade is an opportunity but also a risk and the higher the number of trades, the higher the risk is of losing your previous gains This educational post is not an invitation to DCA blindly and abandon your trading not all. Because if you do, I'll be unemployed... but a great way to introspect and think and ask yourself the good questions : - Am I outperforming a DCA method ? - If my personal performance is negative or way below the DCA, should I reallocate part of my trading capital into a DCA-oriented methodoogy ? The DCA humbled me a lot on assets that I was so sure to have a killer performance with my trading. It has been and still is a great trading lesson that I'm sharing with you today See you tomorrow for the strategy version of that indicator which will help you compare side to side your own strategy vs a DCA ____________________________________________________________ Feel free to hit the thumbs up as it shows me that I'm not doing this for nothing and will motivate to deliver more quality content in the future. - I'm an offically approved PineEditor/LUA/MT4 approved mentor on codementor. You can request a coaching with me if you want and I'll teach you how to build kick-ass indicators and strategies Jump on a 1 to 1 coaching with me - You can also hire for a custom dev of your indicator/strategy/bot/chrome extension/python
BITSTAMP:BTCUSDEducation
by Daveatt
1
Sawcruhteez Strategies: Advanced Dollar Cost Averaging Methods Disclaimer: If you are primarily interested in copying other people’s trades then this is not for you. However, if you are willing to put in the work that it takes to learn how to trade for yourself then you have found the right place! Nevertheless please be advised that you can give 10 people a profitable trading strategy and only 1-2 of them will be able to succeed long term. If you fall into the majority that tries and fails then I assume no responsibility for your losses. What you do with your $ is your business, what I do with my $ is my business. Click here for my Comprehensive Trading Strategy | Click here for my Comprehensive Trading Process In the previous post I outlined two strategies for How to BUY THE DIP . Both approaches are quite hands on, requiring consistent analysis and actively managing orders. They are primarily meant for individuals who actively buy and sell on an intra month or week basis. This post is for individuals with the hodler mentality, who simply want to implement a structured plan to buy BTC before planning on hodling for multiple years. This person is almost always going to find a dollar cost averaging approach as the best way to achieve his or her goal. If you are convinced that the next bull market is here, and you have money waiting patiently on the sidelines, then the goal is to convert the fiat into BTC as safely as possible. The goal is not necessarily to get the very best price, instead the objective should be to maintain a cost basis that is lower than the spot price. Dollar Cost Averaging into a bull market is a very simple and effective way to make that happen. If it is a bull market then the price will be consistently appreciating and after enough time consistent purchases are expected to result in an average cost basis than is lower than the current spot price. Dollar Cost Averaging is an approach that allows someone to regularly buy the same dollar amount of an asset. There are two ways to Dollar Cost Average, by time or by price. Anyone with a retirement account is Dollar Cost Averaging into the investment by time. Generally a specific dollar amount will be invested on a monthly basis, regardless of the price of the underlying asset. The other way to Dollar Cost Average (DCA) is by price. For example if an individual has X to invest then that person can enter 10% every time that the price appreciates 10%. This is a more aggressive approach and is done to ensure that a certain amount of exposure is achieved at a certain price point. When Dollar Cost Averaging by price it is possible to go months, or years, without making an entry. Conversely it would also be feasible to make multiple entries during the same month if the volatility warrants it. Both approaches are completely valid. The preferred method will be determined by an individuals circumstances and objectives. If one has disposable income on a monthly basis then using some of it to regularly buy BTC can be a very good option (DCA by time). On the other hand if an individual has a lump sum of cash waiting on the sidelines then it may be preferred to scale in as price appreciates (DCA by price). This can be done to ensure that the full lump sum is entered before the price gets to high and / or if a certain amount of the underlying asset is desired. Some businesses will implement this approach if they require a certain amount of a commodity to operate profitably. Those sitting in fiat may choose this route if they want to make sure they get at least X amount of Bitcoin. Dollar Cost Averaging by Time This approach is ideal for individuals whose monthly income exceed his or her expenses. A portion of this disposable income can be earmarked to buy BTC as long as the market is bullish. This post will go in depth about how to determine if the trend is bullish or bearish. However there are many technical tools that can be used to accomplish this goal. My preferred method is Consensio . The Ichimoku Cloud is also very powerful. When utilizing this approach it is very important to have a gameplan for what to do if the price declines for an extended period of time. If the value of the investment declines each month after buying more it can be very difficult to cope with mentally and financially. This is especially true if there is no backup plan for putting the purchases on a moratorium or executing a stop loss and exiting the position all together. Dollar Cost Averaging when the price is declining in a bull market is generally the best time to buy. That is because the same dollar amount buys more of the underlying asset. This improves the cost basis and is a primary advantage to the approach. However if the price continues to decline for months, or even years, then buying more of the underlying asset only increasing exposure to something that is depreciating. This is why it is very important to have a plan, and stick to it. If Dollar Cost Averaging by time then it could make sense to implement a stop loss system that is based on time. For example: if price depreciates for one quarter then stop adding to position for one quarter. If price continues to decrease for two quarters in a row then exit the position entirely. On the other hand if price increases during the second quarter then resume Dollar Cost Averaging in the third quarter. It would also be possible to implement a stop loss system based on price. For example: If price declines 15% then Dollar Cost Averaging is placed on a moratorium. If price declines 30% then stop loss is executed and position is exited. This approach is very tricky with Bitcoin. It will often decline 45% in the middle of a bull market. Therefore if this is the preferred strategy then it is important to backtest the percentages that an asset can decrease while remaining in a bull trend. This needs to be done for every asset individually before starting the purchasing program. Dollar Cost Averaging is usually done by those who intent to buy and hodl the investment long term. Most will do this blindly and that is very dangerous. It is very important to have a plan for profit taking, even if planning to hodl for years, or decades. The profit taking strategy can also be done based on time or price. Retirement accounts have a built in profit taking approach that is based on time. Most IRA’s will not allow one to withdraw until they are 59 ½ without severe penalties. Therefore the gameplan is generally to contribute on a monthly basis and start withdrawing / profit taking after enough time has passed to avoid paying penalties. If someone is Dollar Cost Averaging into Bitcoin, or another speculative investment, then it could be a good idea to implement a time horizon for withdrawing / profit taking. A generic gameplan would be to buy Bitcoin with 1% of monthly income, every month, for the next 5 years. Afterwards the plan could be to hodl for a minimum of 5 more years. 10 years from now it will be time to take profit, if all goes well then it could be possible to withdraw a small percentage (~ 5%) per year indefinitely. The main idea with this approach is to figure out the minimum time frame that you wish to hold onto the investment and at what point would you be able to consistently withdraw for the rest of your life without depleting the account. Another approach would be to take profit 1 year after each halving . Enough to cover the initial investment and then hold the rest for 10+ years. This can be an effective approach, but I believe it is inferior to taking profit based on price. That is because it is often best to sell when the price is high, opposed to waiting for a certain date. This is true for almost every investment class, Bitcoin might be a different story due to the depreciating supply. However taking profit based on price can be very tricky, especially for people with a set strategy that employs consistent buying. That is why I believe that it is crucial to learn how to identify the trend and have an incremental process for stopping the buys and then exiting. This is where Consensio works so well, it is a step by step process for recognizing trends and reversals. Dollar Cost Averaging by Price This approach is for individuals who have a lump sum of money on the sidelines who want to ensure gets entered by a certain price. Let’s use a hypothetical individual who has $25,000 in cash. That person, who we will call Dollar Bill, wants to make sure that they can get at least 2 BTC with that money. However, this person is relatively smart and does not want to get overexposed too early. Instead he intends to enter in pieces and only when the price is appreciating. Bitcoin currently is trading at $7,981 and Bill has decided that he cannot sit on the sidelines any longer. Insteading of FOMO’ing in he takes a step back to reevaluate the landscape and come up with a gameplan. He starts by analyzing the charts. Using prior highs he is able to identify major areas of established resistance and he notices three key price points where he wants to enter. The major areas of horizontal resistance are as follows: $8,219 | $9,619 | $11,491 If those levels are broken then the protagonist wants to make sure that he become known as Bitcoin Bill. He is telling all of his friends to buy right now and has grown tired of his moniker after learning about the perils of fiat money. To realize his dream of owning 2 Bitcoin he has implemented an initiative to scale in slightly above each level of resistance. The target entries are: $8,501, $10,251 and $12,251 This won't get the best possible price but it will ensure that he only adds to the position if the market is moving in his favor. Entries are set slightly higher than the levels of resistance as a way to try to avoid fake breakouts, otherwise known as bull traps. Our hero used to be known as Billy Bull Trap and he is determined to make sure that doesn’t happen again. Now he must calculate how much to enter at each level to ensure that he gets at least the 2 BTC that his heart so desires. Since there are three entry points he decides to separate his $25,000 desired exposure into thirds. The calculation goes as follows: $25,000 / 3 = $8,333 Enter $8,333 at $8,501 (target entry #1) = 0.9802 BTC Enter $8,333 at $10,251 (target entry #2) = 0.8128 BTC Enter $8,333 at $12,251 (target entry #3) = 0.6801 BTC Total = 2.4731 BTC Average Price / Cost Basis: $10,108 per BTC After going through the calculations he immediately enters the orders, using Good-Until-Cancel Stop Market Buy orders. A Stop Market Buy order will not trigger until a certain price is reached. Good-Until-Cancel means that it will remain active unless Bill changes his mind and manually cancels the orders. This type of order allows traders and investors to enter positions as soon as the price reaches his or her desired level. This can be very beneficial for those who do not want to wait at a computer all day and night for the right time to enter. They also work very well in volatile markets that are open 24/7 for people who like to sleep without a price alert alarm. By inputting the orders right now Bill knows that he will be able to buy Bitcoin at the prices he wants regardless of when it happens or where he might be. This is a great option for Bill, who is an avid golfer that spends all of his spare time working on his short game in hopes of earning another new moniker. He despises being called Double Bogey Bill by his golfing friends. It is important to note the difference between a Stop Market Buy order and a Stop Limit Buy order. As the name suggests a Stop Market will trigger a market order to buy as soon as the price is reached. This guarantees a fill, but means that there will often be some slippage. If markets are moving fast and breaking through resistance then there may be a relatively small amount of liquidity available in the order books. If that is the case then it is possible to pay a much higher price than expected. For example: if a stop market order to buy 0.97 BTC is triggered at $8,501 then there needs to be at least 0.97 BTC available to be sold at $8,501 on that individual exchange. If not then slippage will occur and a higher price will be paid. It is entirely feasible that the market order will go all the way up to $8,600+ before filling. This is especially true for large orders and / or exchanges with lower liquidity. Individuals that want to avoid slippage will use Stop Limit Buy orders instead. This will trigger a limit order that will only get filled if someone else market sells at that price. If there are enough market sellers at that price then the full order will get filled. If not there the limit order will be in danger of getting blown right through. When price has a legitimate breakout there is generally an overwhelming amount of buyers and very few sellers. If there are few sellers then it means a buy limit order has a high risk of not getting filled. There are pros and cons to each order type. As is often the case it will come down to an individual to determine what is best. Stop Market orders will always get filled but can often be at a worse price than expected. This risk is greatly minimized for smaller position sizes and / or higher liquidity exchanges / assets. Stop Limit orders will never experience slippage but they will be at risk of getting skipped over. This risk is greatly increased for highly volatile markets. Bill is determined to buy a minimum of 2 BTC for the $25,000 that he has available. Using Stop Limit orders is out of the question for Bill because the risk of getting skipped over is much greater to him than the risk of paying a slightly worse price. Furthermore his calculations show that he can expect to get 2.47 BTC based on his target entries, therefore he feels confident that he will end up with a minimum of 2 BTC even if he experiences significant slippage. With a gameplan in place and orders on the books it is possible to be prepared for upcoming price action before it happens. Being proactive instead of reactive is the primary differentiator between emotional investors and the proverbial smart money. Being able to execute that plan is what separates the pros from the wannabes. Dollar Cost Averaging by price is not designed to buy in at the cheapest price. Instead it is meant to ensure that a certain amount of the underlying asset is acquiring and that you are buying into a market that is appreciating. This approach should absolutely be combined with a profit taking strategy. Many who buy in based on certain price levels will prefer to exit at certain price levels as well. For example Bill might decide to sell 0.5 BTC at $20,000 and 0.5 BTC at $100,000. After recouping more than his initial investment he may choose to let the rest of the position ride indefinitely since he now has a negative cost basis (withdrawn more than was originally invested, while still maintaining some of the original exposure). This is by far my preferred approach, and is very possible in a crypto bull market with the right plan and execution. Daily Dollar Cost Averaging A very effective way to Dollar Cost Average by time is to buy a very small amount every day until the desired amount of exposure is achieved. This can be a good strategy for individuals with a disposable income as well as for those who have a lump sum to invest. Those with a lump sum can enter 0.25% - 0.5% of the capital on a daily basis. This will process would take 200 - 400 days to get fully entered. If that is too long for an individual’s taste then it is possible to enter a higher percentage, however I would not consider doing more than 1% per day. Individuals with disposable income on a monthly basis can enter 3.33% per day. That will enter the full amount before the month is over. Then the following months surplus is used to continue buying the same amount per day. Exchanges like Coinbase and Gemini have an option to set a recurring purchase for x amount. This can be a great option for individuals who do not want to Dollar Cost Average by time, however this could obfuscate valuable lessons. Manually doing a Daily Dollar Cost Average can be a tremendous learning experience, especially for those who are uninitiated to active buying and selling. If you decide to use this approach then pay very close attention to the emotions that you are feeling when making the purchase. Are you motivated to buy when price is down 10% over the last 24 hours? Do you feel like buying more than the predetermined amount when the price is up 5 - 10%+ over the last 24 hours? I would strongly suggest keeping a journal that details emotions when implementing the Daily Dollar Cost Average approach. This will enlighten you to when the market is controlling your emotions and when you are prone to making poor decisions. Combining Dollar Cost Averaging with Buying the Dip In the first post I outlined multiple strategies for How to BUY THE DIP . In this post we covered multiple Dollar Cost Averaging methods. It is important to note that these two approaches are not mutually exclusive. In fact they can complement each other quite nicely. I love buying dips in Bitcoin bull markets. If done properly it be extremely rewarding. However it is highly risky and can be very costly if not done effectively. The risks include: 1) Buying a dip that is only the tip of a major selloff 2) Buying a dip and getting whipsawed out of the position right before the market explodes to the upside 3) Waiting for a dip that never comes and letting price get away to the upside As is generally the case when presented with multiple desirable options I prefer to use a combination of Dollar Cost Averaging and Buying the Dip . I find this to be very beneficial to my pocketbook as well as my psyche. Being stuck on the sidelines waiting for a dip can cause a lot of anxiety. That stress can be greatly alleviated by knowing that there is a Dollar Cost Averaging approach in place. Buying small amounts as the price appears to be running away also helps to be patient about waiting for a dip. I like to set a portion of my fiat aside to buy dips and I will use the remainder to start Dollar Cost Averaging. I prefer a ratio somewhere along the lines of 60% for buying dips and 40% is used for Dollar Cost Averaging. I may go as high as 70% / 30% with that ratio depending on market conditions. For individuals who have less experience, or those who do not have the time available to analyze charts on a daily basis, I would suggest a much different ratio. Something along the lines of 10% - 25% for buying dips and the rest set aside to Dollar Cost Average. I think it is always good to have something available to buy when the price dips. The best buying opportunities often occur when Bitcoin drops 30% - 40% while remaining in a bull trend. Having at least 10% of your desired exposure set aside for times like this can be very beneficial. Therefore even if I was committed to a Dollar Cost Averaging approach I would still want some set aside to buy when Bitcoin is oversold in a bull market. While this approach will never get you fully entered in at the bottom, it will be a reliable way to gain exposure into markets that are moving in your favor. My goal is to minimize risk and maximize strike rate. Utilizing an approach that combines buying dips with Dollar Cost Averaging is the best way that I have found to do that. The last puzzle pieces are learning how to identify the trend and manage stop losses. I use the 50 and 200 Day EMA’s to determine the trend. If the 200 EMA is moving up, with the price above and a golden crossover with the 50, then it is a bull market. When Bitcoin is in a bull market then I want to establish a significant amount of exposure while staying flexible and properly attending to my risk. I also use the 50 and 200 Day EMA’s to determine my stop loss. As long as price is above and the trend is up then I want to be in. As soon as the price falls below and the direction of the EMA starts rolling over then I want to start scaling out. If a death cross occurs then I want to be fully out of the position. Another effective way to manage stop losses is with the Bill Williams Fractals on the daily and weekly charts. Through learning how to identify the trend and properly manage risk it is possible to consistently beat the markets average rate of return of a statistically significant sample size.
BITSTAMP:BTCUSDEducation
by Sawcruhteez
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