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Warren Buffett's Approach to Long-Term Wealth BuildingUnderstanding Value Investing: Warren Buffett's Educational Approach to Long-Term Wealth Building Learn the educational principles behind value investing and dollar-cost averaging strategies, based on historical market data and Warren Buffett's documented investment philosophy. --- Introduction: The Million-Dollar Question Every Investor Asks Warren Buffett—the Oracle of Omaha—has consistently advocated that index fund investing provides a simple, educational approach to long-term wealth building for most investors. His famous 2007 bet against hedge funds proved this principle in dramatic fashion: Buffett wagered $1 million that a basic S&P 500 index fund would outperform a collection of hedge funds over 10 years. He crushed them. The S&P 500 returned 7.1% annually while the hedge funds averaged just 2.2%. Today, we'll explore the educational principles behind this approach—examining historical data, mathematical concepts, and implementation strategies for learning purposes. --- Part 1: Understanding Value Investing for Modern Markets Value investing isn't about finding the next GameStop or Tesla. It's about buying quality assets at attractive prices and holding them for compound growth . For beginners, this translates to: Broad Market Exposure: Own a cross-section of businesses through low-cost index funds Long-term Perspective: Think decades, not months Disciplined Approach: Systematic investing regardless of market noise "Time is the friend of the wonderful business, the enemy of the mediocre." - Warren Buffett Real-World Application: Instead of trying to pick between NASDAQ:AAPL , NASDAQ:MSFT , or NASDAQ:GOOGL , you simply buy AMEX:SPY (SPDR S&P 500 ETF) and own pieces of all 500 companies automatically. --- Part 2: Dollar-Cost Averaging - Your Secret Weapon Against Market Timing The Problem: Everyone tries to time the market. Studies show that even professional investors get this wrong 70% of the time. The Solution: Dollar-Cost Averaging (DCA) eliminates timing risk entirely. How DCA Works: Decide on your total investment amount (e.g., $24,000) Split it into equal parts (e.g., 12 months = $2,000/month) Invest the same amount on the same day each month Ignore market fluctuations completely DCA in Action - Real Example: Let's say you started DCA into AMEX:SPY in January 2022 (right before the bear market): January 2022: AMEX:SPY at $450 → You buy $1,000 worth (2.22 shares) June 2022: AMEX:SPY at $380 → You buy $1,000 worth (2.63 shares) December 2022: AMEX:SPY at $385 → You buy $1,000 worth (2.60 shares) Result: Your average cost per share was $405, significantly better than the $450 you would have paid with a lump sum in January. --- Part 3: The Mathematics of Wealth Creation Here's where value investing gets exciting. Let's run the actual numbers using historical S&P 500 returns: Historical Performance: - Average Annual Return: 10.3% (1957-2023) - Inflation-Adjusted: ~6-7% real returns - Conservative Estimate: 8% for planning purposes Scenario 1: The $24K Start Initial Investment: $24,000 | Annual Addition: $2,400 | Return: 8% Calculation Summary: - Initial Investment: $24,000 - Annual Contribution: $2,400 ($200/month) - Expected Return: 8% - Time Period: 20 years Results: - Year 10 Balance: $86,581 - Year 20 Balance: $221,692 - Total Contributed: $72,000 - Investment Gains: $149,692 Scenario 2: The Aggressive Investor Initial Investment: $60,000 | Annual Addition: $6,000 | Return: 10% Historical example after 20 years: $747,300 - Total Contributed: $180,000 - Calculated Investment Gains: $567,300 Educational Insight on Compound Returns: This historical example illustrates how 2% higher returns (10% vs 8%) could dramatically impact long-term outcomes. This is why even small differences in return rates can create life-changing wealth over decades. The mathematics of compound growth are both simple and incredibly powerful. --- Part 4: Investing vs. Savings - The Shocking Truth Let's compare the same contributions invested in stocks vs. a high-yield savings account: 20-Year Comparison: - Stock Investment (8% return): $221,692 - High-Yield Savings (5% return): $143,037 - Difference: $78,655 (55% more wealth!) "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't, pays it." - Often attributed to Einstein Key Insight: That extra 3% annual return created an additional $78,655 over 20 years. Over 30-40 years, this difference becomes truly life-changing. 📍 Global Savings Reality - The Investment Advantage Worldwide: The power of index fund investing becomes even more dramatic when we examine savings rates around the world. Here's how the same $24K initial + $2,400 annual investment compares globally: 🇯🇵 Japan (0.5% savings): - Stock Investment: $221,692 - Savings Account: $76,868 - Advantage: $144,824 (188% more wealth) 🇪🇺 Western Europe Average (3% savings): - Stock Investment: $221,692 - Savings Account: $107,834 - Advantage: $113,858 (106% more wealth) 🇬🇷 Greece/Southern Europe (2% savings): - Stock Investment: $221,692 - Savings Account: $93,975 - Advantage: $127,717 (136% more wealth) 🇰🇷 South Korea (2.5% savings): - Stock Investment: $221,692 - Savings Account: $100,634 - Advantage: $121,058 (120% more wealth) 💡 The Global Lesson: The lower your country's savings rates, the MORE dramatic the advantage of global index fund investing becomes. For investors in countries with minimal savings returns, staying in cash is essentially guaranteed wealth destruction when compared to broad market investing. This is exactly why Warren Buffett's advice transcends borders - mathematical principles of compound growth work the same whether you're in New York, London, or Athens. Note: Savings rates shown are approximate regional averages and may vary by institution and current market conditions. Always check current rates in your specific market for precise calculations. --- Part 5: Building Your Value Investing Portfolio Core Holdings (80% of portfolio): AMEX:SPY - S&P 500 ETF (Large-cap US stocks) AMEX:VTI - Total Stock Market ETF (Broader US exposure) LSE:VUAA - S&P 500 UCITS Accumulating (Tax-efficient for international investors) Satellite Holdings (20% of portfolio): NASDAQ:QQQ - Technology-focused (Higher growth potential) AMEX:VYM - Dividend-focused (Income generation) NYSE:BRK.B - Berkshire Hathaway (Value investing & diversification) --- Part 6: Implementation Strategy - Your Action Plan Month 1: Foundation Open a brokerage account (research low-cost brokers available in your region) Set up automatic transfers from your bank Buy your first AMEX:SPY shares 💡 Broker Selection Considerations: Traditional Brokers: Interactive Brokers, Fidelity, Vanguard, Schwab Digital Platforms: Revolut, Trading 212, eToro (check availability in your country) Key Factors: Low fees, ETF access, automatic investing features, regulatory protection Research: Compare costs and features for your specific location/needs Month 2-12: Execution Invest the same amount on the same day each month Ignore market news and volatility Track your progress in a simple spreadsheet Year 2+: Optimization Increase contributions with salary increases Consider additional core holdings like LSE:VUAA for tax efficiency Consider tax-loss harvesting opportunities Visualizing Your DCA Strategy Understanding DCA concepts is easier when you can visualize the results. TradingView offers various tools to help you understand investment strategies, including DCA tracking indicators like the DCA Investment Tracker Pro which help visualize long-term investment concepts. 🎯 Key Visualization Features: These types of tools typically help visualize: Historical Analysis: How your strategy would have performed using real market data Growth Projections: Educational scenarios showing potential long-term outcomes Performance Comparison: Comparing actual vs theoretical DCA performance Volatility Understanding: How different stocks behave with DCA over time 📊 Real-World Examples from Live Users: Stable Index Investing Success: AMEX:SPY (S&P 500) Example: $60K initial + $500/month starting 2020. The indicator shows SPY's historical 10%+ returns, demonstrating how consistent broad market investing builds wealth over time. Notice the smooth theoretical growth line vs actual performance tracking. Value Investing Approach: NYSE:BRK.B (Berkshire Hathaway): Warren Buffett's legendary performance through DCA lens. The indicator demonstrates how quality value companies compound wealth over decades. Lower volatility = standard CAGR calculations used. High-Volatility Stock Management: NASDAQ:NVDA (NVIDIA): Shows smart volatility detection in action. NVIDIA's explosive AI boom creates extreme years that trigger automatic switch to "Median (High Vol): 50%" calculations for conservative projections, protecting against unrealistic future estimates. Tech Stock Long-Term Analysis: NASDAQ:META (Meta Platforms): Despite being a tech stock and experiencing the 2022 crash, META's 10-year history shows consistent enough performance (23.98% CAGR) that volatility detection doesn't trigger. Standard CAGR calculations demonstrate stable long-term growth. ⚡ Educational Application: When using visualization tools on TradingView: Select Your Asset: Choose the stock/ETF you want to analyze (like AMEX:SPY ) Input Parameters: Enter your investment amounts and time periods Study Historical Data: See how your strategy would have performed in real markets Understand Projections: Learn from educational growth scenarios 🎓 Educational Benefits: This tool helps you understand: - How compound growth actually works in real markets - The difference between volatile and stable investment returns - Why consistent DCA often outperforms timing strategies - How your current performance compares to historical market patterns - The visual power of long-term wealth building As Warren Buffett said: "Someone's sitting in the shade today because someone planted a tree a long time ago." This tool helps you visualize your financial tree growing over time through actual market data and educational projections. --- Part 7: Common Mistakes to Avoid The "Perfect Timing" Trap Waiting for the "perfect" entry point often means missing years of compound growth. Time in the market beats timing the market. The "Hot Stock" Temptation Chasing individual stocks like NASDAQ:NVDA or NASDAQ:TSLA might seem exciting, but it introduces unnecessary risk for beginners. The "Market Crash" Panic Every bear market feels like "this time is different." Historical data shows that patient investors who continued their DCA through 2008, 2020, and other crashes were handsomely rewarded. --- Conclusion: Your Path to Financial Freedom Value investing through broad index funds and dollar-cost averaging isn't glamorous. You won't get rich overnight, and you won't have exciting stories about your latest trade. But here's what you will have: Proven strategy backed by decades of data Peace of mind during market volatility Compound growth working in your favor 24/7 A realistic path to serious wealth creation The Bottom Line: Warren Buffett's approach works because it's simple, sustainable, and based on fundamental economic principles. Start today, stay consistent, and let compound growth do the heavy lifting. "Someone's sitting in the shade today because someone planted a tree a long time ago." - Warren Buffett Educational Summary: Understanding these principles provides a foundation for informed decision-making. As Warren Buffett noted: "The best time to plant a tree was 20 years ago. The second-best time is now" - emphasizing the educational value of understanding long-term investment principles early. --- 🙏 Personal Note & Acknowledgment This article was not entirely my own work, but the result of artificial intelligence in-depth research and information gathering. I fine-tuned and brought it to my own vision and ideas. While working with AI, I found this research so valuable for myself that I could not avoid sharing it with all of you. I hope this perspective gives you a different approach to long-term investing. It completely changed my style of thinking and my approach to the markets. As a father of 3 kids, I'm always seeking the best investment strategies for our future. While I was aware of the power of compound interest, I could never truly visualize its actual power. That's exactly why I also created the open-source DCA Investment Tracker Pro indicator - so everyone can see and visualize the benefits of choosing a long, steady investment approach. Being able to see compound growth in action makes all the difference in staying committed to a strategy. As someone truly said: compound interest is the 8th wonder of the world. --- Disclaimer: This article is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Always consult with a qualified financial advisor before making investment decisions.
AMEX:SPYEducation
by TradeVizion
What Is Dollar-Cost Averaging (DCA) in Investing and Trading?What Is Dollar-Cost Averaging (DCA) in Investing and Trading? Dollar-cost averaging (DCA) is a popular strategy used by investors and traders to manage market fluctuations and build positions over time. Instead of trying to time the market, DCA focuses on consistent, regular investments regardless of price movements. This article answers “What is DCA?”, its advantages and limitations, and how it can be applied in both investing and trading. What Is Dollar-Cost Averaging (DCA)? So what is DCA investing? Dollar-cost averaging (DCA) is a strategy that involves consistently investing a fixed sum at regular intervals, regardless of the asset’s current price. This approach helps distribute the cost of purchases over time, potentially reducing the impact of short-term price fluctuations. Instead of trying to time the market perfectly—a challenging task even for experienced traders—a dollar-cost averaging strategy focuses on regular contributions to average the cost of assets. This method offers a straightforward, disciplined strategy for both long-term investors and traders who wish to build or adjust positions gradually. By spreading out purchases, a DCA strategy may help mitigate the effects of market volatility. For example, during a period of market decline, the fixed investment buys more units at a lower cost, which could result in higher returns when prices recover. Conversely, during a sustained rise, the investor buys fewer units, which helps avoid overexposure. For example, if you invest $50 every week and the market is rising, you will buy fewer stocks, but when the market is moving down, you will buy more with the same amount. What does DCA mean for market participants? DCA is particularly useful in uncertain economic environments where price swings are common. It provides a systematic approach to entering the market, removing the need to make snap decisions based on short-term market movements, and fostering a steady accumulation of assets over time. How Does DCA Work? DCA investing operates by establishing a regular schedule for investing a set amount of money into a chosen asset, regardless of its current market price. Instead of waiting for a particular price or market condition, funds are allocated at consistent intervals—be it weekly, monthly, or quarterly. Over time, this means buying more units when prices are lower and fewer units when prices are higher, resulting in an average purchase price that can be lower than if the investment was made in one lump sum. Consider an investor using DCA. They commit £100 every month to buy company shares. In the first month, the share price is £20, so they purchase 5 shares. The next month, the price drops to £10, allowing them to buy 10 shares with the same £100. In the third month, the price rises to £25, and they purchase 4 shares. Over three months, the investor has spent £300 and acquired 19 shares in total. To calculate the average cost per share, divide £300 by 19, which equals approximately £15.79 per share. This average is lower than the highest price paid and reflects the effect of buying more shares when prices are low and fewer when prices are high. DCA also simplifies the process of entering the market. By adhering to a set timetable, investors bypass the need for constant market analysis, making it particularly appealing for those who prefer a more hands-off strategy. This systematic approach can be applied not only to traditional investments like shares and funds but also to other assets that traders and investors engage with. DCA in Trading DCA isn't just for long-term investors; traders can also employ it to navigate the ups and downs of fast-moving markets. By spreading out their entries or exits, traders may potentially lower the average cost of a position or build on a winning trend, all while managing their exposure to volatile moves. Lowering the Average Price For traders facing a position that's moving against them, DCA offers a way to adjust the average entry cost. By allocating additional funds, the average price of the position may be reduced. This approach can create a potential opportunity to exit with better returns if the market reverses. However, it is important to note that this method also increases exposure, and additional entities might compound losses if the trend continues. Adding to a Winner Conversely, traders may apply DCA to increase their positions when an asset shows strength. By gradually adding to an effective trade, the overall exposure is built in a controlled manner, potentially capturing further movement without committing all capital at once. This method is particularly popular in markets where momentum builds slowly, allowing traders to gradually take advantage of the sustained trend. Applications Across Markets Using DCA in stocks can help manage entries during periods of volatility, especially when market sentiment shifts rapidly. Forex traders often use similar techniques to adjust positions in response to fluctuating currency pairs, while the high volatility seen in crypto* markets makes DCA an appealing strategy for building positions gradually. When using DCA in trading, a disciplined approach is essential. Whether lowering the average cost in a losing position or building on an effective trade, traders should carefully consider the additional risk that comes with increased exposure. Advantages of Dollar-Cost Averaging Dollar-cost averaging offers a range of advantages that make it an attractive strategy for both investors and traders, especially when navigating uncertain markets. Mitigating Market Volatility By investing a fixed amount at regular intervals, DCA spreads out exposure over time. This approach can reduce the impact of sudden market swings. Instead of being affected by a one-off high price, the average cost is spread across different market conditions. This may help stabilise entry points and smooth out short-term volatility. Disciplined Investment Approach DCA promotes a structured investment routine. With regular contributions, there is less temptation to try timing the market. This disciplined approach might be particularly useful when markets are highly volatile or ahead of news and economic events. It encourages systematic investing, reducing the likelihood of making impulsive decisions driven by market noise. Accessibility for All Traders DCA does not require intricate market analysis or deep expertise in market timing. Its straightforward nature makes it appealing to both newcomers and seasoned traders looking for a simpler method to build positions over time. By providing a clear framework, DCA allows traders to focus on long-term goals without the pressure of constant market monitoring. Limitations of Dollar-Cost Averaging While dollar-cost averaging offers a structured approach to investing and trading, there are some limitations to consider. Potential Opportunity Cost Spreading out investments means funds are gradually deployed over time. In a market that is consistent, waiting to invest might lead to missed returns compared to committing all funds upfront. This method can reduce the impact of volatility but might underperform during extended trends. Continued Exposure to Market Trends Investors remain exposed to the market throughout the investment period. If the market experiences a prolonged trend, regular investments will accumulate at better prices, but overall returns may still suffer. This approach does not eliminate market risk and requires a long-term perspective to potentially see a turnaround. Dependence on Consistency The effectiveness of dollar-cost averaging relies heavily on maintaining a consistent investment schedule. Any interruption or inconsistency can dilute the intended advantages of the strategy. It also assumes that investors are able to commit regular funds, which may not be feasible in all financial situations. Comparing DCA to Lump-Sum Investing Comparing DCA to lump-sum investing offers insights into different approaches to managing market exposure and returns. Risk Exposure Lump-sum investing involves placing all available funds into an asset at once. This method can yield higher returns if the market moves in their favour, but it also exposes the investor to immediate risk if the market moves against them. In contrast, risk is spread over time through a dollar-cost average, meaning regular investments reduce the likelihood of entering the market at a high point and potentially lowering the overall average cost. Market Conditions The performance of each approach can vary depending on market trends. In steady trends, lump-sum investing may capture more returns since all funds are deployed early. However, in volatile or declining conditions, DCA could mitigate the effects of short-term fluctuations by smoothing out entry prices over time. Flexibility and Commitment Lump-sum investing requires confidence and a readiness to commit all funds immediately. DCA, on the other hand, offers a more measured entry into the market. This method is popular among those who prefer a systematic approach and might not have a large sum available at one time. The Bottom Line Understanding the dollar-cost averaging definition can help investors and traders potentially manage market volatility and reduce emotional decision-making. While it has its limitations, DCA can be an effective strategy for building positions over time. FAQ What Is an Example of Dollar-Cost Averaging? Imagine investing £100 into a stock every month, regardless of its price. In January, the stock costs £20, so you buy five shares. In February, the price drops to £10, allowing you to buy 10 shares. In March, the price rises to £25, and you buy four shares. Over three months, you’ve invested £300 and purchased 19 shares, averaging out your cost per share to £15.79. Is There the Best Dollar-Cost Averaging Strategy? The most effective DCA strategy depends on individual goals. A consistent, long-term approach with regular investments—whether weekly or monthly—may help smooth out market volatility. Focusing on diversified assets could also reduce risk exposure. What Is the Daily DCA Strategy? This strategy involves investing a fixed amount every day through DCA, meaning it may help minimise the impact of short-term price fluctuations in volatile markets. However, it requires careful planning due to frequent transactions and potential fees. Does Dollar-Cost Averaging Work With Stocks? Yes, DCA is commonly used with stocks. It may help manage the effects of market volatility, allowing investors to build positions over time without worrying about short-term price swings. What Does DCA Mean in Stocks? DCA, or dollar-cost averaging, in stocks, means regularly investing a fixed amount, regardless of price, to average out the cost per share over time and manage market volatility. A similar answer is true for “What does DCA mean in crypto*?”, except it would involve a regular fixed investment in a particular cryptocurrency*. How to Calculate DCA in Crypto* Investing? There is a simple formula to calculate DCA, meaning in crypto*, an investor would just divide the total amount invested by the total number of units purchased. This provides the average cost per unit over time, regardless of price fluctuations. *Important: At FXOpen UK, Cryptocurrency trading via CFDs is only available to our Professional clients. They are not available for trading by Retail clients. To find out more information about how this may affect you, please get in touch with our team. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
NASDAQ:NVDAEducation
by FXOpen
1
Behind the DCA Strategy: What It Is and How It WorksWho invented the Dollar Cost Averaging (DCA) investment strategy? The concept of Dollar Cost Averaging (DCA) was formalized and popularized by economists and investors throughout the 20th century, particularly with the growth of the U.S. stock market. One of the first to promote this strategy was Benjamin Graham , considered the father of value investing and author of the famous book The Intelligent Investor (published in 1949). Graham highlighted how DCA could help reduce the risk of buying assets at excessively high prices and improve investor discipline. When and How Did Dollar Cost Averaging Originate? The concept of DCA began to take shape in the early decades of the 20th century when financial institutions introduced automatic purchase programs for savers. However, it gained popularity among retail investors in the 1950s and 1960s with the rise of mutual funds. Overview The core principle of DCA involves investing a fixed amount of money at regular intervals (e.g., every month. This approach allows investors to purchase more units when prices are low and fewer units when prices are high, thereby reducing the impact of market volatility. Why Was DCA Developed? The strategy was developed to address key challenges faced by investors, including: 1. Reducing Market Timing Risk Investing a fixed amount periodically eliminates the need to predict the perfect market entry point, reducing the risk of buying at peaks. 2. Discipline and Financial Planning DCA helps investors maintain financial discipline, making investments more consistent and predictable. 3. Mitigating Volatility Spreading trades over a long period reduces the impact of market fluctuations and minimizes the risk of experiencing a significant drop immediately after a large investment. 4. Ease of Implementation The strategy is simple to apply and does not require constant market monitoring, making it accessible to all types of investors. Types of DCA Dollar Cost Averaging (DCA) is an investment strategy that can be implemented in two main ways: Time-Based DCA → Entries occur at regular intervals regardless of price. Price-Based DCA → Entries occur only when the price meets specific criteria. 1. Time-Based DCA How It Works: The investor buys a fixed amount of an asset at regular intervals (e.g., weekly, monthly). Entries occur regardless of market price. Example: An investor decides to buy $200 worth of Bitcoin every month, without worrying whether the price has gone up or down. 2. Price-Based DCA How It Works: Purchases occur only when the price drops below a predefined threshold. The investor sets price levels at which purchases will be executed (e.g., every -5%). This approach is more selective and allows for buying at a “discount” compared to the market trend. Example: An investor decides to buy $200 worth of Bitcoin only when the price drops by at least 5% compared to the last entry. Challenges and Limitations 1. DCA May Reduce Profits in Bull Markets If the market is in an bullish trend, a single trade may be more profitable than spreading purchases over time or price dips. 2. Does Not Fully Remove Loss Risk DCA helps mitigate volatility but does not protect against long-term bearish trends. If an asset continues to decline for an extended period, positions will accumulate at lower values with no guarantee of recovery. 3. May Be Inefficient for Active Investors If an investor has the skills to identify better entry points (e.g., using technical or macroeconomic analysis), DCA might be less effective. Those who can spot market opportunities may achieve a better average entry price than an automatic DCA approach. 4. Does Not Take Full Advantage of Price Drops DCA does not allow aggressive buying during market dips since purchases are fixed at regular intervals. If the market temporarily crashes, an investor with available funds could benefit more by buying larger amounts at that moment. 5. Higher Transaction Costs Frequent small investments can lead to higher trading fees, which may reduce net returns. This is especially relevant in markets with fixed commissions or high spreads. 6. Risk of Overconfidence and False Security DCA is often seen as a “fail-proof” strategy, but it is not always effective. If an asset has weak fundamentals or belongs to a declining sector, DCA may only slow down losses rather than ensure future gains. 7. Requires Discipline and Patience DCA is only effective if applied consistently over a long period. Some investors may lose patience and leave the strategy at the wrong time, especially during market crashes.
Education
by thequantscience
Key Elements in Trading & Investing ManagementKey Elements in Trading & Investing Management: Your Blueprint for Success 📊 🔍 Risk/Reward Analysis: Every trade or investment should start with a thorough risk/reward assessment. This ensures you're not just chasing gains but are aware of the potential downside. 🎯 Clear Entry & Exit Strategies: Define your entry and exit points before you trade. This discipline keeps your strategy on track, whether the market moves in your favor or against it. 🏞️ Embrace Market Volatility: Accept drawdowns as part of the trading journey. Just as you'd celebrate profits, handle losses with the same composure to maintain your strategic approach. 🔄 Consistency in Strategy: Avoid tweaking your strategy after a loss. Stick to your rules to foster a consistent trading methodology. 🔧 Utilize All Available Tools: Leverage every tool at your disposal on platforms like TradingView—indicators, charts, and risk management features—to make informed decisions. 🎯 Set Profit Targets & Stop Losses: Implement break-even points and stop-loss orders to secure profits and minimize losses, ensuring each trade is managed with precision. 💰 Focus on Capital Preservation: Your primary goal should be to protect and grow your capital, not just to celebrate short-term wins. Long-term sustainability is key. 📈 Compound Your Success: Use your gains wisely to compound your investments rather than risking them on speculative bets. Let your edge work for you over time. 🌟 Master Your Trading Edge: Identify what gives you an advantage in the market, be it technical analysis, fundamental insights, or a unique approach, and harness it consistently. 💵 Implement Dollar Cost Averaging for Stability:Dollar Cost Averaging (DCA) is your ally for those looking to invest without timing the market. By investing a fixed amount at regular intervals, you buy more shares when prices are low 📉 and fewer when prices are high 📈, averaging out the cost over time. This strategy mitigates the impact of volatility 🌪️ and reduces the risk of investing a lump sum at a peak price. Consistent Investment: Set up a schedule to invest, say, weekly or monthly, into your chosen assets. 🗓️ Emotional Discipline: DCA helps remove emotion from investing decisions, promoting a disciplined approach. 😌 Long-Term Growth: Over time, this method can lead to significant returns as you accumulate more shares at varied price points. 🌱📈 Incorporate DCA into your broader strategy to enhance your risk/reward balance, ensuring that you're not just reacting to market highs and lows but methodically building your investment base. 💡
OANDA:XAUUSDEducation
by DCAChampion
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!
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$/month ? Please note that this is not financial advice, do your own research and only invest money that you can afford to lose. Keep in mind that past performance is no guarantee for the future. Thanks for sharing your thoughts in the comments below, and if you found this useful, give it a like. Hope to see you back soon. Happy New Year and all the best wishes for 2021 and beyond!
BNC:BLXEducation
by Profit_Through_Patience
82
Investing for Beginners 101 - The power of Dollar Cost AveragingInvesting for Beginners 101 --------------------------- How do you build your investment fund? ---------------------------------------- There is no silver bullet to it, and it is easy when you build it across an extended period of time. Introducing the power of Dollar-Cost Averaging (DCA)! One of the easiest ways to get started. DCA is an investment strategy in which you purchase an asset over an extended period of time, to average in at a good price while avoiding the volatility of the market. This strategy proved to be quite effective for both novice and experienced investors. How do you do it? Let’s start with the easiest strategy. Example 1: ----------- Let’s say you want to invest 1000$ 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 🙂
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.
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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