I'm about ready to capitulate myself. Is it best to dollars cost average your way out as well?
PS. I have no complaints, have done well.
Consider that in dollar cost averaging, you convert dollars at a steady rate into another asset. It works, because when the asset is expensive, your dollars buy less of it, and when the asset is cheap your dollars buy more of it. That's exactly how you want to go about buying something.
Now consider selling an asset. If you extract dollars at a steady rate from your store of the asset, it means that when the asset is expensive, you sell less of it, and when the asset is cheap you sell more of it. That is most definitely not how you want to do it.
Instead, to wind down your position in an asset, you should sell that asset at a steady rate; e.g., sell the same amount of bitcoin every month.
By doing it that way, you are getting more dollars when bitcoin is expensive, and less dollars when bitcoin is cheap.
Another way to think about it is this: when you acquire an asset using dollar cost averaging, in effect you're
selling dollars, and by selling those dollars at a steady rate you get the best results. Winding down an asset's position is the mirror image that process. You're
selling bitcoin, and selling those bitcoins at a steady rate denominated in bitcoin (not dollars) gives the best results.
@birr... The first part of your discussion of dollar cost averaging lends some insight to the practice because you are indicating that there is something wrong with employing an opposite strategy... however, then your suggestion largely devolves into a kind of recommendation of a reverse dollar cost average strategy.
NO matter if you are in a BTC accumulation stage, or a maintenance stage or a liquidation stage, your strategy should be to attempt to sell BTC on the way up and to buy BTC on the way down. Of course the more you are on one spectrum or another remains a personal choice but it also effects how you may employ the strategy. So for example, if you are in a BTC accumulation stage you might buy more on dips and perhaps sell less on rises because your goal is accumulation, but that should not cause you to sell on the way down or buy on the way up.
Usually, if some one who is employing a sell on the way up and buy on the way down is panicking because they screwed up and did not sell enough, so the strategy probably would be to attempt to make up for the screw up by selling a decent sized chunk and then returning to the strategy of buying if the price goes down with the proceeds that were generated from the sale.
Continuing to sell on the way down or creating a plan that continues to sell on the way down is not a good strategy nor is it equally good as buying on the way down... and perhaps making and emergency sell because of a screw up and then maybe even going back to HODL, if not feeling comfortable enough to buying on the way down.
