Everyone knows that the crypto market is dizzyingly riding the waves of volatility, which sometimes becomes a real storm. The digital asset prices change unpredictably and cause dramatic implications for traders and investors. That is why developers created DCA trading bots, a great instrument to reduce and negate short-term volatility. You can decrypt DCA as Dollar Cost Averaging, a classical term from the area of the traditional economy.
The problem with crypto market entry timing is to watch an asset trade at all-time highs and wait for lower levels to enter the trade. But there is no way to know when the low limit will come or when it will pass. If we are looking for traditional value investing strategies or dip buying, it won’t be easy to find any entry point. During the time of a huge trend in the market, there is no way to predict a good entry point based on traditional trading strategies. Basically, we can reduce the risk of throwing all in at high prices by entering the market at different time intervals. This idea is at the heart of trading bots that use dollar-cost averaging.
What Is The Main DCA Trading Bot Strategy?
Essentially, the DCA trading bot strategy eliminates much of the painstaking work involved in defining the best time at the market in order to buy or sell assets at the most appropriate prices. Dollar-cost averaging means splitting an investment in allocations into several more smallish investments of equal amounts, divided into equal time periods.
This technology aims to reduce the massive hit of volatility on the price of the chosen digital asset. The secret is that rates of digital assets will change constantly. And every time the investment will make, the price will also jump. So the great solution is just to divide the investment amount into more minor approaches, and this will automatically reduce the danger of volatility. This solution aims to avoid the one-time investment error, which is difficult to define in terms of asset prices. By taking this approach, investors and traders can sidestep the risk of making counterproductive conclusions from FOMO or greed & fear index.
The advantage of DCA trading bot is that it is more likely to close a deal earlier if the buyer has made multiple purchase orders than a web bot. The period of holding the coins will be shorter, and you will be able to reinvest money faster.