Topic: Dollar Cost Averaging Question (Read 407 times)

not addressing o_e_L_e_o, just using his comment as reference and addressing the other readers

DCA (dollar cost average aka constant dollar plan) is meant to be if you want to invest say $52k a year. instead of saving up $52k and then making one purchase at year end. you would under DCA save up $1k a week and just buy as soon as you deposit.
where by the 52nd week you should have a average of the years price. and not missed any opportunity during the year waiting to save up a lump sum.

but if you are like O_E_L_E_O who is worried about a $2.99 charge on $200 (1.5%) but not so concerned about the 5% swings of market volatility in a weeks period. then its not really 'reducing risk'

far better to deposit your weekly/monthly amount. and then look at the chart to see if when depositing if the price is at a weekly high or low. and buy if its at a low. or wait a few hours, days to buy the microdips that happen daily/weekly.

having a 'just throw the whole $1k at whatever price it is as soon as your deposit arrives". can cost you more then 1.5%, rather then waiting a few hours or days that week to take a better price.

very worse case you just buy before the end of week. still fulfilling your "just throw $1k at whatever price" mindset. and try again next week. to do better then "whatever price" mindset.

after all if your willing to buy at "whatever the price is" for the week. your not losing anything by still having that mindset if there was no dips during the week. but most of the times.. there are, so might as well try maximising the average by buying the dips

also. if an exchange does have a $200 order with $2.99 fee, but a $201 has a 0.5% fee($1) might aswell pay an extra 1cent on the order and save $1.99 on the fee.. you know common sense

And if the price starts to dump for the next 7 days, then the reverse is true and OP would have ended up with more bitcoin if he bought all in on the seventh day than if he bought in daily.

As I said above, the more frequent your buys then the closer you will come to buying in at the average value of bitcoin during the period of time in which you are buying. Whether this works out as more or less profitable than buying less frequently depends entirely on what the market does during that time. But again, the whole point of DCA is not to maximize profit, but to minimize risk, and the closer you come to buying at the average price then the smaller your risk becomes.

That's great question s.r
I will suggest you when Whole Market has dumping on that moment you will partial investment in the part wise. In starting go with 200$ in bitcoin and any others alts. After that waiting for some more dump If do so some again investment 10% amount. If you have make strategy to invest in weekly and monthly basis investment you will be best. And other way you have to focus support and resistance when market has correction you have best time to invest amount 5 % to10% in every correction . Long term prospects you will have make big amount

Still, this is not a perfect way to save the fee while the dollar cost average. For example, let us suppose bitcoin prices start to pump for the next 7 days, so if OP buys daily he will get more satoshi's as compared to if he bought all in on the seventh day when prices are high. In this case, the saving fee may not be that important.

Depends entirely on where you are buying. Last I checked, Coinbase for example (not Coinbase Pro) charges a flat fee of $2.99 for a trade of $200, but a 0.5% fee for trades above $200. So 7x $200 trades would cost $20.93 in fees, whereas 1x $1400 trade would only cost $7.00 in fees. Gemini have a similar structure with flat fees for small trades and percentage fees for larger trade, which again works out better if you make a single larger trade rather than multiple small ones.

Well, If am buying bitcoin today from a centralized exchange, I rather buy the whole $1400 and withdraw to my private wallet for a safe keep. However If I were to dollar cost averaging (DCA), by buying in part, say $200 or more every week till I am done buying, and I need to be withdrawing to my private wallet, I will have to be withdrawing the bitcoin via other protocol otherwise known as off-chain. For example, I can buy bitcoin on binance and withdrew via Bep20 for a safe keep, likewise I can buy a wrapped bitcoin in TRC20 network in a bid to reduce fees.

inner-exchange "fee's" are % based not fixed amount.

1x $4k at 0.5% fee = $20
10x $400 at 0.5% fee = $2, $2, $2, $2, $2, $2, $2, $2, $2, $2 = $20
100x $40 at 0.5% fee = 20c, 20c, 20c, 20c, 20c, 20c, 20c......  = $20
1000x $4 at 0.5% fee = 2c, 2c, 2c, 2c, 2c, 2c, 2c, 2c, 2c .......  = $20

so no extra cost.
the then benefit is that you can be more timely about purchases to get the dips. so you save more then 0.5% by buying at better timings

what does cost though is if your BANK charges per wire transfer. which can hurt if you do daily/weekly deposits instead of monthly.
same goes for btc withdrawals. if your taking out hourly btc instead of weekly, monthly btc that can be 900 blockchain transaction fees instead of just 1 or 4 withdrawals.

so best advice wire transfer into exchange once a month and remove BTC once a week/month.
then during that month, trade as you please hourly or daily.

Buying it during the dip sounds more likely and better. Doing it on a daily basis, what if it's not ideal to buy because you consider it high? Well, the thing here is that you're likely having a lot of resources. If I'm in your position, I would do DCA but not have that definite time when I'll do it.
Maybe every dip that I consider, I'll buy half, and then if there's another dip, I'll just do a follow-up and buy again. Sort of like that which is convenient to me.

It won't be feasible for you to buy bitcoin every day. Isn't?
I think you are better buying bitcoin on every week but another question is how much total amount would you invest in bitcoin?
How for many week can you buy 1400$ worth of bitcoin and how long are you willing to hold them ?

It's simply an argument that plebs like us should be more efficient with our capital. Capital is limited, why use it to buy blindly without assessing your position, and the current situation of the market? It's also better for our sanity.

If you can set up hourly trades, then why not? The likelihood is you are going to get stung for fees by making more frequent smaller trades than by making one larger trade every week. Once you get to hourly trades, you are looking at ~720 trades a month, so unless you are investing huge amounts, you are also going to start getting hit by rounding errors in both the traded amount and the fees paid (neither of which will be in your favor) from your multiple very small trades.

The least amount of effort is to just set up automatic recurring buys once you've worked out which structure gives you the best overall fee rates.

The market has gone down and so his profits have gone down. That's not an argument against DCA. Yes, if he had perfectly timed the market then he would have made much more, but conversely, if he had poorly timed the market then he would have lost a lot. The whole point of DCA is to minimize risk, not maximize gains.

I understand. I was merely telling him that DCA might not be for everyone. Capital is limited, plebs can’t simply buy anytime, and not care, especially with an asset as volatile as Bitcoin.

An illustration of an inefficient usage of capital by Michael Saylor during 2021, https://twitter.com/0xsisyphus/status/1468942871701204992

When you do talk about DCA then always look for possible bottom.It wont really be mattering whether its on a day to day basis or on weekly because if you do really tend to take advantage then you should be buying with those increments even though its hard and cant really be done so easily since no one knows or could predict on whats the bottom but nothing beats out when you do
have the awareness and knowledge on what you are doing.

Why not then hourly? If daily is more beneficial than weekly, then certainly hourly would be more beneficial than daily. What about investing every minute, or second?

Anyway, I disagree because I don't think the goal is to get closer to the average. I think it is more important to get the best return for the least amount of effort.

Both of them have pros and cons.

If you both $1400 of Bitcoin in one trade, there is a chance that you can get a huge loss if it goes down more but at the same time you can get huge profits if it goes up as well.
On the other hand if you buy $200 daily, you have a chance to buy at a lower price and gain more profit there but at the same time you can buy also at the bottom which can affect your profits as well.

TBH, this is very subjective because different people have different strategies when it comes to investing. As for me, I'm just allocating a portion of my total salary and I'm buying Bitcoin once every month regardless of the price but as much as possible I'm buying at the lowest price possible.

You are missing the point of DCA. The entire point of DCA is to not try to time to market; pick an amount and a time frame, and invest regardless of what the price is doing at the time. As soon as you try to time the market then you are no longer DCAing. If you want to do that, that's fine, but if you want to do DCA then you should see if you can set up automatic recurring buys so you don't even have to look at the market at the time of your purchases.

I would agree. Daily buying will get you closer to the overall average price of bitcoin than weekly buying will. If you assume bitcoin is going to continue on a overall upward trend, then over enough time daily will work out more profitable all other things being equal. However, as I mentioned in my first reply, the fees will not necessarily be equal and could result in significant differences.

This is correct, however, it is not the situation set out by the OP - he has $1400 per week to invest - the question is how best to allocate that weekly amount - single weekly buy or seven daily buys.  Given the daily volatility of bitcoin I argue that daily is likely to be more beneficial.   For example the high today (so far) is $47,555; yesterday the high was $50,102.

Moreover, if you expect the price to increase over time and never drop then there is almost no point in a DCA strategy, however, that isn't what we see in reality.  In reality there is an upward trend over very long periods but in the shorter term there is a high degree of volatility.  

To turn your example around, consider how much less you would have if you fully invested at the high in early November, versus DCA'ing over the following few weeks (indeed probably months).

Of course you can only know with hindsight what was the right strategy so it has to be based on probability.

Every week? How long, forever? It wouldn’t matter if you have unlimited capital. But because I believe you don’t have enough capital, always wait for a DIP, try to use your capital as efficient as possible. Don’t buy blindly like Michael Saylor did in 2021.

What you want to do can be referred to as SIP, i.e. Systematic Investment plan whose main purpose is to reduce the impact of volatility on your overall invested amount.Having said that logically the greater the number of investments the greater the DCA/SIP effect which would result in lesser impact of volatility.
Hence if you want to invest 120$ you must select 4$/day plan over 30$/week plan but due to Maker/taker fees,taxes,minimum purchase amount  and other variables people cant always optimize this strategy.

I totally agree with you in the sense that, I would consider my paycheck which is monthly here, and my budget. I believe these two variables will truly help you to make the right decision cos it will just be a monthly transaction with just smaller fees instead of many small transaction fees per month which will eventually be more than what should be required.

Dollar cost average is good but what happens when you don't have the extra funds to dca! If the asset you are holding is btc, it is fine if you are able to dca when the price is down but if you can't at that time no need to worry much, hold and patience has always worked,  it also applies to other assets (the good alts of course). No need to build a mountain out of a small stone 

Most probably the weekly DCA investment is best for you and you have good budget for the same like $1400 weekly can acquire you good amount of bitcoins. I am also a DCA investor and now i have been doing it for regularly for six months but last time i managed to reach $100 week for the first time in my six months DCA journey.I am also running the thread for the same on the forum to keep the members updated about how it's going and you can check it out for reference but remember it's weekly DCA investment:

My Past six months bitcoin journey

The best part is you want to invest in bitcoin not some altcoins which will give you good profits in the long run so just be patient enough to hold for all these years and buy at dips if you get chance.The amount is big so make some wise decision and store them safely in your wallets.

Doesn't make too much sense to separate the transactions out if you're going fiat to crypto. I've seen people mention the fees which is a consideration, but under the assumption you're using a centralized bank account and/or converting fiat to crypto, it's more of a hassle than it's worth. I wouldn't even bother making a risk with an exchange numerous times, do one large transaction and take ownership of the crypto by taking it off the trading platform immediately. You don't own any coin in which you do not process the private key.

In terms of price, you will not guess in what moment of the week it will be the most favourable, so the only thing that you will regulate by buying in one day or every day is fees that you spend. If you buy just paying for transaction fees, it is better to buy 1400$ straightaway as you need to pay a fixed fee no matter how big your transaction is. Nevertheless, if you use a centralized exchange where you have to pay, for example, 1% from the whole sum, it doesn't matter for you what way to choose.

Seem a hard job to do unless he is willing to watch the chart every day and trade. There is a dip in price every day but I'm not very sure if it's worth it since you will have to keep the BTC in the exchange as you keep accumulating.

If I have to keep DCAing, I'd just wait for the dip and buy the whole $1400 like this very day. If the price falls, then just keep buying if there are funds left. Or after receiving paycheck after a month from the day job.

Its highly depend on the volatility if the price of assets that you are buying. The more volatility means you should spread your DCA more to scoop assets at better average price. Bitcoin price action is changing in high percentage everyday so the general DCA principle is not that applicable since its commonly use on stock market which price varies few percentage per month or weeks.

DCA everyday is the best way to apply in crypto if you want a safe average price. Remember that price in daily basis can change more than 10% so what's more if you do a single buy per week.

There are two scenarios for DCA. One is when you have a lump sum of money to invest, and the other is how to invest your income over time.

Lump Sum Scenario

In the lump sum scenario, it can be shown that investing the lump sum at one time is the best strategy (on average). Of course, your return will vary depending on what happens after investment, and DCA would reduce that variance. However, DCA in this scenario has an opportunity cost which can easily outweigh that benefit.

Imagine that you invest portions of a lump sum over a year. You expect the price to increase over time, so consider how much more return you would have at the end of the year had if you didn't wait a whole year before investing those last portions.

Investing Income Scenario

If you have an income, the idea of DCA is to automatically invest a fixed portion of that income when you receive it. This encourages you to save and it eliminates the temptation of timing market. It is the superior strategy.

You should buy 1.400$ a week. Dollar Cost Averaging is mostly done weekly, some investors might do it monthly, depending which time frame is more comfortable. I wouldn't recommend daily since you don't have that much fluctuation on the price daily most of the time. So it would just make investing a bigger job, weekly is much easier for you. Of course, you should set the amount you want to invest weekly according to your full investment fund.

There's no need to buy every week, just look on the trend of the chart and doing a cost averaging you should see a continuous drop before deciding to take a buy actions. That's right to have a $200 per entry but be careful, once there's a quick recovery don't attempt to panic buy; you might have a break even profit. Always follow the rules of buy when low and sell at high.

Time based buying is not necessary, instead it should be dip based or support based on chart where price bounce back is likely to happen. Dollar-cost averaging is the strategy of spreading out your stock or fund purchases, buying at regular intervals and in roughly equal amounts. When done properly, it can have significant benefits for your portfolio. this strategy will make your into quickly when market bounces back that is why  it is considered very successful strategy.

 https://www.nerdwallet.com/article/investing/dollar-cost-averaging-2

Each decision will have its positive and negative side.
All in weekly with $1,400: You will save some dollars to pay a fee of trading (purchasing). And if you withdraw it to your personal hardware wallet directly, it will also save dollars for fees of withdrawing.
But, you may miss some chances to get the lower price if once the price drops after you are all in buying BTC at that time.

Daily on $200, it may lead you to get lower price following the daily changing price. You may get it lower or even higher.
However, once more, the fee to spend maybe much more because you need to buy it several times.

Or, you can buy it twice, by dividing twice purchase in a week to save more dollars for fees but also get lower price probabilities.

When it comes to buying and selling then this is actually an own personal choice or preference because its our money then its our full control
on what actions we would make on this one.

DCA or simply waiting for the dip is someones decision because not all would really be have the funds or finances
and could only done single purchase and thats where we do really mind off much.

So its a personal choice or action.

It's totally up to you. You are the one to decide. If you are following dollar cost averaging method to invest in BTC, pick any time frame and follow that. It can be a daily $200 or weekly $1400. Frequency is something you should set first, it depends on your time, fund availability etc.

OP is talking about DCA. You should know what DCA is. DCA is a method to make your purchase price average (lower).

no need to buy bitcoin every day or every week, but buy it every time you have the opportunity when the price has peaked down due to market price corrections, then buy it all at once. when you are in doubt about the market, up or down on the next move, it's better to just buy half of your property before the bitcoin movement moves and buy back half when the market price is clear.

Do whatever suits you ig? It depends on the amount of effort and possibly the amount of extra money you could pay for fees tbh. Effort being trying to check weekly on when the market is on a pretty good dip though in general, it's a buy whenever you want moment. You're doing DCA, it isn't exactly necessary to take into account the current price since you're expecting profits far far off into the years. Just that you might be that type who wants to buy the dip, hence why I said it depends on the amount of effort you want to exert.

It is preferable to buy it once a week when the price of Bitcoin is suitable

I would rather prefer weekly DCA than daily since we won't have to make the transactions of depositing/withdrawing everyday.
Also, it would be more better to analyse the charts and buy according to dips occuring within that month.
You could may be skip a week to see if price dips and then buy instead of buying at higher prices.
If the price doesn't go any lower then buy at current price with 2 week's amount.
You will not only be able to get better average but also save on fees.

Depends.

If you buy daily, you'll pay x7 more fees to the exchange. Might sound not much at first but that's x7 more fees every year and they do add up quickly. Other than that It won't make much of a difference.

Some people don't want to check the prices every day so for those people buying weekly is a better idea.

Of course you do - its the whole point of buying on a DCA basis: you recognise that the price varies up and down (i.e. fluctuates) and so you spread your buys in order that sometimes you benefit from buying at a lower price.  If you didn't care about fluctuations in price you may as well just use your entire investment in one go and not bother to cost average.

Fees are certainly the main thing to take in to account here. When it comes to dollar cost averaging, it’s really a strategy that works by sheer luck of the draw, so technically by placing trades daily vs weekly vs monthly would like be the best strategy but again fees have to be taken it to account. I wouldn’t over think this one, bitcoins price movements are just too random.

If you do Dollar Cost Averaging, you won't care too much about fluctuation. It is a strategy for people who don't have time to follow market or don't want to have pressure from daily changes of price.

If you let price fluctuation affects your decision and DCA action, you are trading, not DCA.

People advised very good above that min amount to do DCA should be significantly bigger than trading fee and withdrawal fee. Because you should move your Bitcoin by withdrawal from exchange to your own wallet.

Not your keys, not your coins.

when doing a bank deposit or withdrawing coins from the exchange. there may be fee's in fixed figure amounts. so do these as little as often

EG dont bank deposit daily and coin withdraw daily.

however with your weekly deposits. once deposited. exchanges do NOT charge hourly,daily or weekly just to hold your value in their custody.
and when making an order in the exchange most orders are % based. thus
10X of $140 at 1% is the same total fee as 1x of $1400 at 1%
so it doesnt matter from a fee prospective how frequently or infrequently you make the exchange orders.

but as said its the deposit and withdrawal fee's that can change things

if an exchange is charging you fixed amount value for an order. or charging you just to hold funds in custody.. find a better exchange as thats not normal/best practice for exchanges

I agree with this, subject to the exchange fees not being significantly different I think you would be better buying daily.

Rationale:
1. You will (over time) benefit from the daily fluctuations in price
2. Assuming the buys are made on an exchange the only fees will be the exchange fees for each buy - these are likely to be on a percentage basis and therefore indifferent to one $1400 buy or seven $200 ones;
3. withdrawals to your wallet can be done weekly or monthly as you prefer to minimise network transaction fees

I don't recommend to buy Bitcoin everyday since it's time wasting and you need to pay more fees. Weekly and biweekly are the best option for DCA, the market change often so you wouldn't miss the moment. While monthly I think probably you already miss the moment and some people aren't convenience to wait for a month.

If you want to do DCA, all you need is patience and don't regret if you bought at the peak.

If you are not going to worry about fees too much, I think the best way is to do it daily, so you are averaging at different prices more and more compared to just one price every week. That's if you have the time to cover it all and understand why you are doing it in the first place. Maybe automate the continuous buying of BTC and stick to a tough time so it could be an experiment to share with those interested in it.

I hope you can update us here with what you plan to do.

I would advice to do it weekly or even monthly. Every month, you will have bitcoin fall that can be big or small but you can take advantage of such fall to maximize your DCA.

It helps you to save trading fee and to have better entry price. Patience is key, even if you are doing DCA. DCA means you regularly accumulate Bitcoin for your portfolio but it does not mean you should not wait for good price to enter.

One major feature of DCA is convenience, so do whatever is the most convenient, whether it is daily, weekly, monthly, quarterly, or whatever. Ideally, it is set up as an automatic savings program so that you don't even have to think about it. If possible, maybe you would have part of you paycheck automatically sent to an exchange and have the exchange automatically buy.

It's better to buy it weekly due to transaction fees.
But another factor that you should also look is the chart, buy when the chart having a correction. If you don't know it yet you will have a 10 minutes read on the internet about chart analysis to know when the chart is in correction state, it will save some worth of dollars for you and you already save for fees by doing it weekly.

I think the best strategy  to do average dollar cost when you buy Bitcoin or any other asset is to use weekly Technical chart of Support and Resistance and buy at support in at least 3 steps. Your buying should not be time based ( weekly or monthly)  but price action based that makes more mathematical sense and this way your trade goes in profit quickly when market pulls up.

I would rather do it once a week. A daily $200 purchase would not be cost-beneficial. Buying on a daily basis, as others have already pointed out, also means paying fees on a daily basis. That would not be the best way to go. That's wasting some precious Bitcoin.

Also, a weekly purchase would somehow provide you ample amount of leeway in choosing your best entry price. Of course, it doesn't matter much to DCA but, you know, a lot could happen in 7 days. A dip or correction could happen within a week. That's a good entry point.

I would say do it weekly. Here's why:

Exchange fees will probably be a big incentive for you to buy weekly instead of daily. It really depends on the specifics of where you're buying, as some charge a fixed fee for every time you deposit/buy. This also applies to withdrawal to your own wallet, you want to minimize those fees as well, so you might do a withdrawal once a month for example.

Another factor that might push you towards weekly buys is the mental one. If you still have fiat around and you see the price going down you might get anxious waiting for the next day to buy more. Once you already allocated the weekly payments, then it's done so no reason to keep thinking about the price for the week.

Because there's no way of knowing if daily or weekly will get you more bitcoin per fiat unit, I reckon it's better to just minimize exchange fees and keep your head clear of price thoughts on the week.

if $1.4k is your entire "disposible" value after bills&meals. dont just buy all $1.4k as soon as its paid in.
look to see if the current price is higher or lower then the weekly/monthly average bitcoin price.

if the price is way above the weeks average it may be a hype bubble/spike so dont put all funds into an order. try and wait for the dip.

always try to buy low/sell high

maybe skip the first week. and just keep that first $1.4 spare in your exchange account. then week 2 buy coin. and if the price then goes down you have spare cash to buy the dip when it happens rather then hoping the lower price is still there the following week(3)

Dollar Cost Averaging is usually done weekly or monthly with smaller amounts of money depending on your budget any paycheck, so you can't really ask everyone to buy Bitcoin with same amount of money.
Investing $1400 weekly makes sense only if you have much bigger paycheck and if you have enough money for food, utilities and everything else .
There are several website doing DCA calculations but dcabtc.com is best I found so far:
https://dcabtc.com/

Where are you buying it from?

The most important thing to consider here is fees. If you are buying it somewhere which charges a flat rate fee, say $2 per trade for example, then you'll lose much more in fees making 7 trades instead of 1. Or you might find that you get charged 1% per trade for the $200 trades, but only 0.5% per trade for the $1400 trade.

Also consider how often you will withdraw your bitcoin to your own wallet and the associated withdrawal fees. On most platforms it will be far cheaper to pay for one withdrawal of $1400 than it will be to pay for 7 withdrawals of $200, and you'll also save yourself more money in the future by not having multiple small UTXOs which need consolidated.

If I wanted to buy $1,400 of bitcoin every week, should I buy $200 a day or should I buy the $1,400 every week?

Any options will be greatly appreciated.