I've noticed that a plenty of members, especially Newbies create posts like "Which coins to chose?; Bitcoin or Altcoins? How much to invest? and etc.". However, they often forget that for being successful in something as well as on trading person needs strategy. I decided to review one of the most preferable trading strategy for newbies and not only for them. Taking into account that majority of them new into trading as well, I did my best to make this post as simpler and short as its possible. So lets begin.
CAS - stands for
Cost Averaging Strategy, which is used for minimizing the risk in volatile market. Usually when trader applies following strategy in stock market, he chooses the same day of the month and starts buying stocks for fixed amount of money at the current market price irrespective of whether it has risen or fallen. Some people say that this strategy doesn't suit for crypto-market.
Nevertheless we can adopt this strategy into cryptocurrency market!
Let's assume the following scenario: You have
1.5 BTC in total. The price of ETH went down to
50k satoshis, and you decide to buy it for
0.1 BTC, in a while the price goes down again for
10% and here you will turn on
CAS strategy and will double your position. Some hours later price goes down for
-20% and you again double your position which you had in
-10% down. When price decreases for
-30% you will double your previous position.
Now lets see what we have:
Price of ETH in satoshis - 50k; The % of price drop - 0%; The amount of position in BTC -
0.1 BTC;
Added amount after price drop - 0 BTC; The amount of ETH - 200Price of ETH in satoshis - 45k; The % of price drop - 10%; The amount of position in BTC -
0.2 BTC;
Added amount after price drop - 0.1 BTC ; The amount of ETH - 423Price of ETH in satoshis - 40k; The % of price drop - 20%; The amount of position in BTC -
0.4 BTC;
Added amount after price drop - 0.2 BTC ; The amount of ETH - 923Price of ETH in satoshis - 35k; The % of price drop - 30%; The amount of position in BTC -
0.8 BTC;
Added amount after price drop - 0.4 BTC ; The amount of ETH - 2066After this kind of scenario
average cost of ETH would be equal to
3874, which means when price will eventually return to your first entering point you will receive
30% profit! Now decide which one is better, entering at once with all your money at 50k price and waiting till market recovering or dividing your assets and being ready for making profit even in
Bear Market.
Hope that it was clear enough to understand and would be useful tool in your trading-arsenal!