Skip to main content
All CollectionsCryptocurrency & Trading
DCA (Dollar Cost Averaging) Strategy
DCA (Dollar Cost Averaging) Strategy
Eyad Tal avatar
Written by Eyad Tal
Updated over a week ago

Dollar-cost averaging (DCA) is an investment strategy that divides the total amount to be invested across purchases in order to lower the purchasing cost and reduce the impact of volatility on the overall investment. Using this method, you will avoid a one lump-sum investment risk.

Traders who use a DCA strategy will generally lower their cost basis in an investment over time. DCA works out favorably only if the asset price increases over the time period of the investment above the average entry price. The general concept of the strategy suggests that prices will eventually rise. The lower cost basis will lead to less of a loss on investments that decline in price and generate greater gains on investments that increase in price.

There are many DCA strategies, from periodical purchases without taking into consideration the asset's price or by defining purchase intervals based on the asset price.

Did this answer your question?