Topic: Have a clear understanding of what DCA means - page 3. (Read 441 times)

These are nuances. What is classically called DCA, pure DCA, would be buying the same quantities at the same time intervals. If it is not so exact but we can buy more depending on the available money or we vary the intervals depending on the availability (and we buy an extra amount for example on the day we receive a bonus) it would already be a variant of DCA, which can have more volatility.

With pure DCA in an asset that appreciates over the long term what we do is to dampen volatility and as we move away from the same intervals and equal amounts we risk having more volatility.

I didn't bother to check the website you attached because you are already deviating from the true reason and scope of DCAing in investment. This is an investment strategy that has longlived before cryptocurrency and the main aim is to divide your money into equal and smaller parts and invest regularly. What you are describing here is quite the opposite as your plans will not be equal and the investment will be irregular. All these are what DCA itself preaches against.

However, you own your money and you can invest it the way you want, and just like me, I practice something similar to what you explained, but we should never call it true DCA, it's a different thing entirely.

You can technically do it like this and twist the strategy in whatever way you want, but the main purpose of DCA is to just buy an equal amount every time, to eliminate the psychological/emotional factor of markets. Changing the amounts every time kind of defeats the purpose of doing DCA.

DCA does not only include investing small amount of capital over time. Small or big capital for each time of DCA depends on your total capital for investment and your DCA plan.

You even don't have to use a same amount of capital for each DCA round. Sometimes you can use smaller or bigger amount of capital for a DCA round. Because it can depends on your feeling about the market trend as well as your available funds for DCA at that time. If you see the market is good and you have money in hands, you can DCA with doubled capital than your normal amount.

If your income flow suddenly decreases, you can stop DCA or DCA with smaller capital amount.

Many things that affect your DCA plan and don't bind yourself with any amount of capital. Even you try, you will fail to follow it.

Want to have DCA math and tool, use it https://dcabtc.com/

Hello! I'd like to seize this moment to offer my insights on the Dollar-Cost Averaging (DCA) strategy, aiming to clarify its concept and its intended purpose for those who may still find it unclear.

DCA involves consistently investing smaller, equal amounts over time, as opposed to making large, irregular crypto purchases. Think of it as making payments for a product in installments, at regular intervals, until the total is paid off. When you regularly invest in your preferred cryptocurrencies, you automatically accumulate more assets over time, regardless of market fluctuations. This can help you grow your holdings and potentially reduce your overall average cost during market dips.

In contrast, a lump sum payment is a one-time investment, the opposite of DCA.

Let's delve into how DCA operates:

Imagine the current price of BTC is $20,000, and you're a high-earning individual looking to invest in this asset. If you make a lump sum investment, you would acquire one BTC at a cost of $20,000.

However, with DCA, you spread that $20,000 across five equal $4,000 purchases, resulting in costs of $20,000/BTC, $15,000/BTC, $5,000/BTC, $5,000/BTC, and $25,000/BTC. This approach yields an average cost basis of $18,000, and you'd have 2.3 Bitcoin. When Bitcoin's price eventually rises, your gains can be amplified because you lowered the average cost of acquiring your holdings. With DCA, you steadily accumulate more Bitcoin, even during market ups and downs.

To illustrate, your first purchase acquires 20% of 1 BTC at $20,000. The second purchase, at $15,000, gets you 26.66% of 1 BTC. Your third and fourth purchases, both at $5,000, result in a total of 80% of 1 BTC with each buy. Your final purchase, at $25,000, represents about 16% of 1 BTC. In total, you've accumulated around 2.3 BTC.

However, it's important to note that DCA may not always work in your favor. In some situations, it could increase your average cost, especially during a bull run. Nevertheless, the purpose of DCA is to spread your investments incrementally, which can be advantageous in the long run. It provides a balanced approach to accumulating assets, ensuring you still acquire your desired cryptocurrency. I hope this explanation sheds light on the essence of DCA.