The Bitcoin DCA Strategy Easily Explained

In this post, I want to go over a strategy that beginners can implement with any asset or commodity that have solid fundamentals.

Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.

- A lot of people have a hard time timing the market, and buying the exact bottom of a dip.
- In this post, I want to explain a strategy that the average joe can use, in order to optimize their average entry price of their position
- DCA, or Dollar Cost Averaging, is when investors divide up the total amount of capital they're willing to invest in, and simply invest a portion of it regularly, regardless of price action and volatility.
- So for instance, buying Bitcoin every Monday regardless of whether it has formed a new all time high, or has corrected 30% from its local top, is an example of DCA.
- We can apply this idea with a slight twist, and aim to buy the local dips.
- Above, we see Bitcoin's daily chart on the logarithmic scale.
- The 5 Simple Moving Average (SMA) is marked in blue, 20 SMA in green.
- A very simple DCA strategy would be to buy at the 20 SMA when the 5 SMA is at a downtrend.
- Looking at the price action of the past, we can roughly backtest this strategy.
- The points marked by the red circle would be regions where we would have entered a position for Bitcoin.
- Given that we enter $10,000 for each position, we would have entered a total of $50,000 at $25k.
- Giving us 140% returns, this would amount to $120,000 today.

If you're struggling with technical analysis and you're having a hard time educating yourself on buying the right dips, refer to this idea, and try to think of your own way of dollar cost averaging through a simple strategy, as simple as referring to the moving averages.

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