Market volatility and trading wisdom of DCS

This last week we saw falls in Bitcoin, Ethereum and countless other cryptocurrencies in the top 20 by market cap.

This brought with it FUD, as in fear, uncertainty and doubt. And along with it FOMO, as in the fear of missing out.

People asked me what to do, and I wisely resisted telling them what to do, because I am not a financial advisor.

But what I did say is when the market gets volatile you should rely on time tested strategies, and one of them is dollar cost averaging or DCS.

Simply put it is the regular buying of an investment asset at regular intervals over time, which has been shown to result in lower average cost basis over time and better returns on investment over time.

I think this makes sense because most investments don’t go up in a straight line, they go up in a jagged line with a series of highs and lows, ups and down.

We can’t reliably choose the bottom or the top on the way up. But mathematically if we spread out our capitol by buying small amounts at regular intervals we don’t have to because the math takes over.

The laws of mathematical probability state you will get enough lows this way to lower your overall cost basis to a value lower then if you try to guess the dips and pour all your capitol in at once.

This isn’t investment advice, this is math education or math entertainment for those of you who like math. :)

One of the things I learned trading stock options was that it doesn’t matter whether your right or wrong about market direction, as long as the mathematical probabilities of success are on your side, you win.

Yes, as hard as it is to believe, math is always right. It does matter whether you think Bitcoin will rise tomorrow or fall tomorrow, 84% probability of success, always means 16% chance of failure, so you win over 4 times out of 5.

Those odds of success are much better then 50/50. Which is the way most people function. If the market goes way up they win big, if the market goes way down, they lose big. That’s trading like the world is binary, black or white, light or dark, hot or cold..

The world is not binary, it’s multi-factorial. You don’t need to be a math major to understand that.

The real beauty is you don’t need to understand the math of probabilities to put the math on your side. You just Dollar Cost Average, and the math will do the rest.

So market volatility is bad, FOMO is bad, FUD is bad, Math never lies and this is not investment advice, it’s either education or entertainment, you decide.

The End. . . for now.
@shortsegments

About @shortsegments

Shortsegments is a writer focused on cryptocurrency, the blockchain, non-fungible digital tokens or NFTs, and decentralized finance for over four years.