Topic: DCA instead of stop-loss (Read 279 times)

This trading technique is only appreciated when there is enough capital to fund your trading wallet. For little capital traders stop-loss is so irreplaceable considering the volatility of the market and the ease to which trend chances with unannounced news or when a major suppy or resistance zone is triggered or broken. To me DCA is even more dangerous than stop-loss.

I recently just learned how to DCA, stop loss is like burning your money away lol.

I'm currently searching for projects that are a good candidates for DCA, any suggestions? I'm currently DCA'ing $MATIC $DAO and $ADA.

Right entry point is something the most hardest thing you could search off on this market since you wouldnt able to know if the current price would be already the bottom and tend to make out some
recovery or would really be just be the start of a long term possible decrease or decline in the market which no one could ever tell on the first place.

The good thing about DCA is that whenever you do buy into those low key points even though you do have floating losses but having that DCA method then when the time comes that
the market do make out some u turn then this is where you do see on why DCA is good into these kind of times.

Not all though would have the knowledge or capability in doing so but it isnt really actually a bad choice to make.

I heard that this type of trading is called "ladder". Since a trader never sells the coins bought on unprofitable orders, he needs to keep a significant amount of deposited stablecoins or fiat money in reserve. Perhaps such a strategy can be used when there is no news about the purchased asset or the trader does not care of the market analysis at all.

I think the tactic you describe might work for Bitcoin which is likely to rally in the foreseeable future, but it's generally dangerous not to use a stop-loss order. You'd better research the market and try to predict the direction of price movement in order to choose the right entry point.

How about doing DCA with a shitcoin? Because, I have seen many coins which never bounce back but do keep on decreasing in value over the time. Not just week, I have been holding few coins like that for years; one good example for such a coin is RDD.

When you are confident about bouncing back then arranging new funds for the purpose of DCA may not be a problem for many people here. But the only thing we must need to make sure is that we are keep buying a  highly potential coin or not.  I never recommend anyone to go for DCA with any other coin except bitcoin. Overall, I mean where you are into DCA is more important as DCA may not work for all assets unlike stoploss.

A very basic thing on which you shouldnt put up stop loss because once it do triggers out then those losses are realized unlike if those are open orders then you could really able to apply averaging

and this is how DCA been performed and to those people who do believed about applying SL on DCA method then it couldnt really be just possible because this isnt how should be applied.
On the side note of DCA then this one sounds very basic and simply but this would test out your emotion and of course your capital on doing so.

After exiting at $40k by hitting stoploss, then with what position that you are going to average at $30k levels? In my understanding, averaging will be possible only if you have open trades. It is even applicable for investments. If you exit all your holding then entering again will be considered "buy back" not averaging.

So, trying to making use of DCA along with stoploss will not provide the actual benefit of DCA.

Stop-loss is to stop your loss. DCA is to average your entry price over time. Their names are different and also represent the core ideas behind. They can not be use as alternative because stop loss is for exit, DCA is for entry. You can not call an exit is also an entry. That is very weird and never be true.

However, you can do your stop loss at $40k and make a DCA at $30k. Stop loss first and wait for price falls deeper to make DCA. So if you want to apply this, you have to do stop-loss early enough so that you can wait for deeper falls which would be -20% from your stop-loss price. At which you will have a new entry, for DCA.

Stoploss is for trading.
DCA is for investments but when you are trading fundamentally good assets then you can still go for DCA. When there will be no chance of bounce back, getting into DCA will not make any sense.

For DCA, you must need available capital. By exiting at stoploss, you are making your capital available for next trade.

DCA may not feasible for small investors whereas everyone is recommended to exit at stoploss while into day-trading. If you are into long term trading then you may go for DCA instead of exiting at stoploss levels.

Do whatever strategy you're comfortable at and what's more profitable to you. We may suggest stop loss for those that they can't the market anymore and that's the best that they can do until they wait again for the market fluorish.

But just as you, if you've seen the light with DCA then that's good for you. Because there are the others that don't even consider DCAing because they're already losing.

They look at their losses but they don't do anything such as countering it through DCA or stop loss.

Now that's well said!
Hope it helps me mature a bit (not in a physical sense as I'm not exactly a spring chicken either). My respect and thanks.

You are free to do whatever you want with you money, really
The point was not that you should do DCA. It's up to you.
The point was to not call DCA something that's not DCA, since what you do now is confusing anybody reading and trying to understand

It's your emotion trying to play a fast one on you by making you think you can save what should be allowed to go. We run away from certain stuff so we can live to fight another day and tell a better story. I've been caught in this same line of action in the past. Now I realize that nothing beats Stop Loss. Dollar Cost Averaging is great too and I've nothing against it. However, it shouldn't be a replacement for SL. Both don't work the same thing and purpose. Sometimes, it's good to call it quits with a losing asset and move on instead of stubbornly clinging to it all in the name of averaging down. Cut your loss short and move on.

Oh okay, im not exactly follow the theory on the book or in wikipedia Im DCA=ing the dip, because just like the meme you never know where the bottom of the dip.

Offcourse you feel free to DCA as in wikipedia or theory on the book, if you feel that you should do that 

They say another man's meat is another's poison. I think stoploss is still preferred. Putting your stoploss target very close to the price on entry can be a reason for the problem. So reducing your risk appetite and extend your stoploss is helpful , being a haste for profit can hurt your stop target often because of volatility hitting you out.



This I believe also. Stop loss is the surest trading strategy for trader. Despite it takes a trader out but you have another time to get it right. Taking a good shot at the market at appropriate time will give you peace of mind, extending your stoploss is far a little from the price is the way on stoploss. If you don't use stoploss, your account is in big risk especially if you taking bigger risk for profit.

... a bit of misunderstanding here, due to lack of clarification from my side:

I don't do the classical DCA but rather carry out the scenario (when DCA is required) like this:

Rely on my signal to buy an amount of asset, predicting that it will go up certain % within certain time period (according to my calculations, right? I work for me, so i must be right  ). I'm wrong and the price drops. I keep my cool.

I wait for my next buying signal for the same asset - as if I hadn't bought at all - and I use that time to buy required amount (I'm sure everybody can calculate that!) again to bring it back to within less than 0.5% loss (a bit hard to do if it went down big time, it takes a lot of money if the original order size was big).

If I'm right this time, it takes just a small movement in the right direction to recover the lot and get some profit.
If I'm wrong again, that's where it starts to get hairy - my next signal might be even deeper down and it might not even work, again.

But I stick it out and it works, due to two things: I don't invest a lot to start with, and downturn as well as upturn goes in waves, not in the straight line, so I catch the bottom of the wave, eventually.

Most of the time I make a lot more profit after DCA than with my original investment, due to the vastly increased size of the trade.

Hope this clarifies things.

P.S. I don't buy or sell signals, I code my own using pine script on TradingView. So - when it misfires, I know who to blame 

What you seem to do is some sort of hunt for buying the dip.
DCA means a clear plan and investing every x days no matter of price evolution.
Imho you should read a little more to understand DCA..
https://en.wikipedia.org/wiki/Dollar_cost_averaging
https://www.investopedia.com/terms/d/dollarcostaveraging.asp

The point of dollar-cost averaging is to buy an asset daily/weekly/bi-weekly/monthly regardless of price. Basically a "strategy" that acknowledges that you can't time the markets so you're just going to average in instead. Starting to DCA only at a certain price sort of somewhat defeats the purpose.

I'm not saying that you shouldn't do it or that what you said is a bad strategy; but yea.

what am i missing exactly?

I have heard before that since 2021 that DCA is having connection with bitcoin price, that if one move in one a direction that the other will also move in a particular direction. I heard it from my brother who has been trading forex for over 15 to 20 years ago. I also read about this on crypto news in 2021.

I am a crypto trader, I have used stop lose several times before, when it will close the market I opened in loss, the market will correct back and I will lose when I supposed to have gaining all because of stop loss. I stopped using stop lose for this reason many months ago if not over a year ago, but I think it is the later.

Well if you're DCA'ing into coins that are relatively well known I think you're good to go? Bitcoin is one well-known example to be the best coin in DCA'ing, I mean you'd never go wrong with Bitcoin in general anyway. I've always used DCA'ing after letting go of trading since I never, ever want to go back to the days where my psyche was taking a toll due to the movement of the market, especially a very volatile one like the crypto market. Glad I did anyways.

Never trade against the market mate wherein always follow the trend and of course don't move your stop loss to prevent massive losses. Because to be honest that is the common problem of some traders why their account always wipe out afterwards so be aware and must have risk management.. If you can't see an opportunity to buy base on your strategy as well better to take a break, always remember that tomorrow is another day.. Lol

Lol if you're just going to do dollar-cost averaging only at certain prices or only after a certain amount of price decrease, then you're totally missing the point of dollar-cost averaging.

theres still chance that bitcoin down to 30k area, im ready to dca at that price but if its not then im also fine.

Yeah, that must be the best option for a trader can have on negative market direction. But, it will be possible only on following conditions:
1. DCA will be possible only with fundamentally stronger assets like bitcoin.
2. DCA is all about investment hence only on spot market possible with delivery (withdrawing to personal wallet).

Yeah, if you are about to average your buying costs then you should never prefer to go all-in. It means that you will have some reserve always to buy more when dips happen.

Honestly though, if someone is not financially capable of putting even a little bit of money into bitcoin every month, then that person probably shouldn't be investing in the first place. Saving up some money to hopefully get up a business(in a niche/industry that the person has a good amount of knowledge in) some time in the future is still the way to go in my book.

Capital is the key, I agree. And the timing factor (all puzzle pieces falling into their right places), when do you do your DCA, as it could produce tremendous losses never to be recovered if wrong.

Then again, I do know someone who was patient enough (and probably lucky enough) and also happy with small gains + compounding, that has made it into now considerable trading order quantities, all from small start (since 2016 if I'm correct here).
Having said that, in 2017/early 2018 he's rather missed out on the bull run by trading and not investing but in the long run 5 years later, he's okay and discussing buying 100 x VOW:DE/DAX with me at the BBQ dinner.

Never used stop-loss. Go figure.

DCA is a different thing from stop-loss for me. If you are a trader you must rely more on the stop loss.
Why? Because I believe there's a lot more opportunity to trade in the future compare to holding it and another thing, most traders have a plan before opening the trade, entry point, target exit, stop loss. And some are considering the risk:reward ratio too.

DCA is considerable but we know that not all would be financially capable on doing things and instead they would cut-loss so that the capital that they do have left would be something be invested

on other possible options that they would look upon.For those who do have extra money for doing DCA then it could be done but this would really require soo much trust and patience yet we know
that price could deep down further and its up to someone on how they would really be looking for this one.

you can't compare trading with investing and there's another thing, trading cryptos is complicated. if you only trade bitcoin at least you have more security but the problem is that it requires a lot of capital as compared to trading altcoins which does not require having a lot of capital but is riskier compared to bitcoin. for example when trading altcoins - USDT you must also follow the BTC - altcoin pair, to be more specific if you trade LTC - USDT you also have to follow the BTC - USDT pair and the BTC - LTC pair in order to have an idea of the movement of the LTC - USDT pair at least is the conclusion I came to when trading altcoin - usdt in these years, of course I could be wrong. about the stop-loss. anyway each person has their own strategy, I rarely use stop - loss because it is not necessary, I buy and sell normally, just know the right entry point and follow the btc - alt and btc - usdt pairs

If you can learn when to walk away and stick to a tight strategy on that then it's likely fine.

This is very similar to how a lot of high return copy traders work on exchanges though and the majority of them get rekt by not learning when they should stop trading (seems like an addiction to some).

Many will say that I'm crazy, but I have dropped stop-loss completely out of my trading. It turned into 'guaranteed loss' way too often, due to price fluctuations which can be hectic at times.
I do my 'due diligence', I buy an asset, I set my profit target and the damn thing drops just enough for it to trigger the stop-loss.

You guessed it, it later recovers and goes up past my profit target, leaving me behind to cry.

Yes, I do calculations and adjustments on my profit-to-loss ratio and the rest of it but there's no 'one fits all formula'. Not even 'one fits most of them', for that matter, that will work for me. Maybe I'm too impatient for it.

I'm way happier now.

Let me explain:

I don't like investing in crypto, I do a little bit of that with NASDAQ. I trade crypto and that's what gives me the kick, my daily dose of adrenaline (if I can't ride my bike, that is  ).

So, in case that the market turns against me - I become an investor until I spot an opportunity to carry out a correctly calculated DCA (I've done it enough times that now I can be fairly certain when will it move in my desired direction and that the movement will be enough to recover and close the deal in green).

Admittedly, sometimes it takes weeks before that opportunity shows up, but it always does - I just need to be ready for it and have the required funds available.

It requires a lot of reserve, but hey - it goes to show that the 'up to 5%' rule really makes sense.

Anybody on board?