Why Dollar Cost Average (DCA) Strategy is Becoming Safe Heaven in Bear Market
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In Cryptoverse that one strategy I always heard traders talking about is Dollar Cost Averaging (DCA) until now.
It has become a "hot" or "Common" Strategy for majority in this space. Is it really that safe heaven for traders in this bear market?
Let's find out ahead in this post why DCA is now applied by most people and if it really works out or Good without any financial advices but just from personal experiences.
What is Dollar Cost Averaging (DCA)?
DCA is all about not Putting all your eggs at the same time in basket.
This mean DCA is investing in a coin in parts at different prices with small capitals.
Take this example of DCA: I Bought Hive at price of $0.5 but only invested 25% of my portfolio.
Price went 10% more down and than I invested another 25% of my portfolio into Hive at $.4 This is called Dollar cost Averaging.
Why DCA Strategy is Becoming Safe Heaven in Bear Market
There are few reasons why I think like this way about DCA strategy and most trader who are actually applying it will possibly relate too.- DCA Saves from Market Volatility
- Reduce Risks
- Less Stress, Less Gains
As far I have observed these are possible reasons to say why many people prefer DCA.
In situations like FTX market has uncertainty and high volatility where being 100% sure about investing in coins isn't possible with all technical analysis and so when there's volatility and down trend DCA is far most better strategy in such time to Reduce these risks.
It is less stressful as it reduce risks but also comes with less rewards.
The Correct way of Doing Dollar cost Averaging (DCA)
Mostly people do Dollar Cost Averaging completely Wrong and later blame strategy for not working out.
It is not possible to be perfect always and that's where DCA works.
Timing matters a lot, one cannot say he/she is doing DCA buying from peak to all the way bottom.
The correct way is to simply wait to prevent bad timing and simply Go with 10% of Portfolio to minimize risks.
This is Hive chart and by using DCA Strategy correctly can simply recover from loss and turn into profits.
So, Last day Hive went all the way to $0.37 something from $0.31 Meanwhile I'm Doing DCA started Buying Hive $0.5 all the way to $0.28.
only if I had applied DCA than could have recovered a lot but how?
let's say I invested last 25% of portfolio in Hive at $0.28 which was lowest and rest of 75% portfolio also invested in hive at $0.5, $0.4, $0.35
By selling 25% of Hive I bought (at $0.28) near $0.39 than re-investing 25% when it went back to $0.31 and selling again at $0.37 that way it is possible to accumulate more and perfectly using DCA.
Fin.
In the end this is what I think why DCA is becoming most used and safe heaven for traders in bear market.
As far in my opinion it didn't worked out quite well since I haven't applied yet properly.
Well, do let me know your thoughts on this and what strategy you feel like is safest at the moment.
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All the content and images are mine except indicated. No copyright infringement intended. Not a financial advice. DYOR. 25/11/2022.
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