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Dollar Cost-Averaging (DCA) Explained By Team Professor

Team Professor is a group of traders with a strong belief in digital currency. A concentrated group of cryptocurrency professionals, traders, and blockchain enthusiasts from a vast range of backgrounds. Their team strives to educate each one of their clients on fundamental and technical analysis, as well as price action.

The Importance Of DCA

Dollar-cost averaging, or DCA, is a great way to get you to invest in a market as volatile as crypto. As a newbie to investing, the term was completely foreign to me, but it turned out to be very useful. 

The process is simple. Let’s say you have a fixed amount of fiat (let’s say $200) that you would like to invest in Ethereum (ETH). Instead of putting $200 in ETH in a single order, DCA it, by splitting the $200 in smaller investments over a certain period of time. This can be done at regular time intervals or regular price intervals.

For example, if the price of ETH was $2,000 at the time, you wish to invest in it. you can say, “Ok, I will invest $20 every week”. 

As an alternative, if you want to support your portfolio in a bear market, you can say, “OK, OK, so I’m going to put a limit order for $50 ETH at every $50 price intervals.” For example, $50 ETH at 2000, $50 ETH at 1950, $50 ETH at 1900 and $50 ETH at 1850. In this situation, one might ask the question “If I’m going to buy ETH for $1900. why should I buy it at a higher price when I can just sit back and wait for it to go lower?” The answer to this can be seen in the DCA ratio.

It is impossible to accurately predict how the market will perform. Yes, Technical Analysis and Fundamental Analysis can be a great resource to use when deciding on investments and trends, but in the short term, the market can be volatile and difficult to predict. you don’t know when the price will reach the desired level of $1900. It may drop to $1950 then bounce back up or never break $2000.

DCA eliminates the need to ‘time the market’ and helps you reduce the normal costs you pay for a certain period of time. It’s a great way to invest, and if done right, it will bring you good returns!

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Article By Team Professor

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