Dollar Cost Averaging + Discipline in Holding = Gains?
Dollar Cost Averaging is an investment technique in which an investor invests a fixed dollar amount at a set time interval regardless of the price of the share. Over the past six months many have reported consistent gains by using this method. For example one YouTuber made over $15000 by investing just $100 into LTC per week for 6 months. There are a certain number of fundamentals that make DCA a safer strategy for the cryptocurrency market:
1. It's difficult to time the peaks and dips
This one is a given, it is very difficult to time peaks and dips in the cryptomarket. Often traders find themselves using complicated trading analysis techniques in order to invest to only find gains only marginally higher than those who just held. DCA makes certain that one gets a favorable average buying price per share or coin.
2. It's a disciplined strategy
Investing a fixed amount per week regardless of the share price is a very disciplined strategy as well, those who stay firm to a specific investment strategy whether that's holding, or something else usually come out on top.
3. It's a flexible strategy
DCA is a flexible strategy in the sense that if a share/coin does tank exiting out would be a lot less painful than buying at the peak and selling low.
Concluding thoughts on DCA
As with any sort of investment strategy there are definite risks, and more so with the volatile cryptocurrency market, but DCA combined with disciplined holding is as good of a strategy as any in my books.
Cheers
~Np
Usually, maintaining discipline is the hardest part of any strategy, especially with something as volatile as the crypto-market. I tend to use a DCA with a
small percentage of my overall portfolio and wish I had exercised more discipline to do so with a larger portion sooner.
I also like how you acknowledge the difference between trading and investing; albeit subtle. Thank you for sharing @nphacker.
Thanks for the comment! The thing I like about DCA is that it's for the most part safe (of course relatively speaking there are a lot of variables like market the particular coin/share that affect the strategy). Let's say that you are not sure whether a specific altcoin will do well, buying small portions at set increments would go a long way in making sure that you're covered in the case it tanks, and in the case it doesn't you may get excellent gains.
The one altcoin I have consistently held onto the longest is Unobtanium because I think it will have a much more reliable long-term value. Although I can see where the same logic can be applied to any of the altcoins, save for some of the more obvious copycat ICO shills.