A quick look at Dollar cost averaging
Investing in the crypto market is never an easy feat, and in times like this (a bear market) things just seem to get worse. So much fear that your investment could turn to losses really quickly. The experienced traders have various strategies which they employ in order to reduce these risks, and one of them is the Dollar cost Averaging technique.
WHAT IS DOLLAR COST AVERAGING?
To put it in lame man terms, Dollar cost averaging is simply buying assets in small bits rather than all at once.
Let's say you have 500 dollars ready to buy bitcoin. Rather than buying all at once, you decided to buy 50 dollars worth of bitcoin every week. After about a week bitcoin price drops, you don't care and you keep buying. Then after you've invested your entire 500 dollars bitcoin rises back. You'll definitely be in profit, whereas if you'd invested all in at once, the profit will be little to nonexistent as all your investments would be down along with the dip. But constant buying at various lower prices will yield profit during a pump. Such is the power of dollar cost averaging.
I personally have made use of the dollar cost average technique a couple times and it has been very effective with helping me not to buy at the wrong time. It also takes away the pressure of constantly having to monitor the markets like I have to do when I invest all at once.
One thing to note however is that it's not a strategy for short term trading. If you're dollar cost averaging, you have to prepare your mind for a long term trade as in the short term returns are little, but over time the number of times you'll buy it at a lesser price may increase, and when it pumps you'll have made a lot of profit.
Also, as with all of Crypto it's good you do research with the coins you're investing into, and make sure it has a good foundation as dollar cost averaging into a scam will definitely not yield you profits, especially because it's a long term trading strategy.
In conclusion I think the dollar cost average technique is a good way of investing into a project by long term investors. It reduces the possibility of buying at the top as you're buying at various prices.
It can be a very powerful tool in the hands of a long term investor.
This post is not financial advice
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