Investors using a dollar-cost averaging strategy tend to cut their costs over time on an investment basis. A lower-cost base will result in lower investment losses at falling prices and will result in higher returns on investments with rising prices. Here, we shall introduce to you an AI-driven app for auto crypto trading using the dollar-cost averaging strategy.
Dollar-cost averaging is a simple, cheap and attractive strategy that has been used for decades to generate wealth. It works best when prices are falling, especially when combined with the other strategies we will discuss in this article. Dollar-cost averaging lets investors buy more shares at lower prices and hold these shares until the market price reaches a level where they are comfortable taking a profit. There are a number of ways to implement a dollar-cost averaging strategy, but the basic premise is to take a fixed amount of money, say $50, and divide it into a number of small, regular investments, say $10 each. The amount of money you buy is not important. You just need to ensure that the investment amount you are investing in is the same amount each time.
What is the definition of dollar-cost averaging?
Dollar-cost averaging simply means a strategy that ensures that the investor is purchasing a proportion of the current market value of an investment at a particular price. Generally, the investor will buy a particular number of shares at a particular price and at that price, a specified number of shares will be purchased by the investor. After the price of the shares rises or falls, the investor is paid for the number of shares purchased at the specified price. This price will never be less than the purchase price and will never be more than the market price. It is the investor’s money that is invested in the investment, and should the share price be below the purchase price, the investor is the one who will receive the shortfall amount, plus any dividends received during that period.
The benefits of dollar-cost averaging
If you are an individual investor, dollar cost averaging will help to save time. You don’t have to worry about losing a portion of your investment in a single stock market crash. You can also more easily stay invested throughout the market’s recovery from the crash. Investors tend to use these strategies in order to: Keep investments well-diversified among companies in your industry. Reduce market risk. Price volatility is the biggest risk to your investment. As the older bear market ends, the ability to buy shares at lower prices increases. This is especially important if you don’t have time to ride out a bear market and are worried about missing out on a return as stocks recover.
When should I use dollar-cost averaging?
Dollar-cost averaging is a very effective tool in staying in line with the market over time. When deciding to use the strategy it is important to have a plan for when you should sell. Selling too early may take the advantage away from you when the market rises. How do you know if you are “inline” with the market? If you can invest equal to the amount you think you are going to spend for a particular purchase then you are in line with the market. This is what Dollar-cost averaging is for. What do I do with a profit? Dollar-cost averaging can be used for cryptocurrencies (in exchanges such as Binance), real estate and stocks – they will generate profits at some point in time. This is the beauty of the strategy, the investor is not tied to any particular sale price in the future.
How do I implement a dollar-cost averaging strategy?
As with most investment strategies, Dollar Cost Averaging has two parts to it. This article will discuss the application of the strategy to cryptocurrency trading. First, consider which coins you want to invest in. Second, you will need to determine how much capital to invest in each of the coins. Each coin will require different capital as a percentage of the entire portfolio. I recommend that you determine the appropriate minimum amount for each coin and you will see how this relates to the strategies later on.
Find below some of the recommended settings when using a dollar-cost averaging strategy in day trading with Royal Q quantitative auto crypto trading bot. In the Trade Settings page, make the following settings:
- First Buy in Amount = 10 USDT
- Margin Call Limit = 10 or 15 or 20
- Whole Position Take Profit Ratio = 1.1%
- Whole Position Take Profit Callback = 0.1%
- Buy in Callback = 0.5%
- Sub-Position Take Profit Callback = 0.1%
In the Margin Configuration page, make these settings (do not forget to click the Confirm button for the settings to be saved):
- Margin Call Drop = 1 (for all fields)
- Multiple Buy Ratio = 1 (for all fields)
In the Distributed Take Profit Allocation page, set 1% for all the sub-positions and then click the Confirm button for the settings to be saved. Now, click the Save button to save the trade settings on the Trade Settings page.
Finally, set the Strategy Mode to Sub-bin Mode Real-time Settlement (for the Royal Q to be taking its fuel fee automatically after each trade). Click the Confirm button for the settings to be saved. Afterward, you can click on the Start Trading button to commence trading.
Dollar-cost averaging is a great way to build wealth over time. A dollar-cost averaging plan will allow long-term investors to buy and sell their shares depending on the market’s price fluctuations. This strategy is a wonderful strategy for risk-averse investors who are not comfortable with the volatility that comes with market investing. Click here to start straight away to implement this dollar-cost averaging strategy in the Royal Q auto crypto trading bot.