What is DCA?
Dollar-Cost Averaging (DCA) is an investment technique with which investors can lessen the impact of market price volatility on their investment by spreading their capital across multiple purchase points. The aim is to reduce the risks on an investment asset by lowering its starting price using the practice of stepped investment.
A DCA saves you the time spent in keeping with the movements in the market prices. It achieves this by making purchases of Cryptocurrency tokens at set intervals as against making a lump-sum investment. So you don’t have to sit all day in front of your computer and watch the grass grow while looking out for the best time to make a purchase.
As long as you have determined the bot’s parameters, you can watch from the sidelines while the bot makes the purchases at the set times.
The Best DCA Crypto Bots
The Crypto bot market is steadily gaining momentum as more people start to warm up to its potential as a tool for convenience and profit in the long run. We’ll introduce some of the best DCA crypto bots to you in the following sections.
Coinrule is a cryptocurrency trading platform that allows users to trade cryptocurrencies using the power of automation. Armed with various tools and bot techniques, it will ultimately result in more comfortable and rewarding trading for its users.
This platform includes various tools and bot tactics to help you improve and earn from your trading. Kraken, Poloniex, Coinbase Pro, HitBTC, and Binance, are among the exchanges it supports.
It also has an Accumulation bot with which you can benefit from the DCA trading technique.
For security, its encrypted API keys and 2FA provision protects your assets from unwanted intrusion. And this is in addition to the Cloudflare CDN with its capacity to resist the efforts of cyberattacks.
Self-acclaimed as a full-package cryptocurrency trading platform, and rightly so, Bitsgap counts Binance, Gemini, Coinbase Pro, Kucoin, Kraken, HitBTC, Poloniex among some of its biggest supported cryptocurrencies. Its encrypted API lends credence to its claims for top stakes in the safety and security leaderboard. And there’s even more, with the 2047-bit protocol encryption and the 2FA, or two-factor authorization making for additional protection of user accounts.
Its AI-powered Combo Bot employs DCA and GRID trading algorithms that make for more precise trading. The potential for making profits with these provisions is very high, and it comes as no surprise that it ranks among the most popular trading tools in the current crypto market.
While you get a free trial on signing up, its paid version offers more advanced features with the promise of better returns.
If you want a simplified trading system, especially if you’re just getting started with cryptocurrency, Pionex is a good place to start with. This platform takes care of all the scutwork using its in-built client bots, all of which have been wired to take on the technical aspects of your trading. There’s provision for a grid trading bot that charges a modest 0.05% commission for every exchange they process.
At the same time, their arbitrage bit is touted as being capable of earning you between 15% to 50% at minimal risks. You’ll be encouraged by the array of testimonials on their websites about the profits traders have realized while doing business with them. In essence, they offer the prospect of getting good returns on your investment at a reduced risk of operation.
With the promise of trading with reduced risks for better profit margins, 3commas is another platform that lives up to its billing. It is equipped with several resources and tools, chief among which is the”smart trading terminals” and the trading bot that puts in a shift at every time of asking. And it supports Coinbase, Huobi, BitMEX, and KuCoin, among other top exchanges in the market. It is also one of the options in our list with the lowest operational costs.
You’ll find well-defined information on its mode of operation and the list of DCA trading options available for use on its website. You get the chance to use already made bots or to build your bots using the advanced features in the directory.
If you trade in Bitcoin, Litecoin, Ethereum, or a hundred other trading platforms, and you want a reliable trading bot for your exchanges, Cryptohopper will be a good pick. With an interface that’s easy-as-pie, while being very effective, this trading platform is a hit among Crypto traders. It is equipped with several tools that can yield massive returns in your trading when well exploited. And then, it can help you to put your exchanges in order before sanctioning a transaction, making for a more rigorous control system.
You’ll find pictorial and video illustrations on how to use it on their website, replete with written instructions that will help you properly navigate its workings. It’ll literally take you by the hand as you go through troubleshooting operations, DCA settings, and a host of other features.
So if you’re wet behind the ears in the business of cryptocurrency, this option would be a very apt choice of platform.
With a capacity to provide four different use options, one of which is free, Wunderbit is every bit as effective as it is acclaimed to be. Its pricing is even flattering: ranging from $9.95 to $44.95, with the promise of a 59% discount when paid for on an annual basis. If you think that this is too good to be true, wait till you see its exciting features, chief among which are the order count and the auto-price deviation features.
If you find these features too complex to use, there is a surfeit of other pre-made templates that will come in handy. If you want flexibility with your trading bot and you’re not exactly big on funds, Wunderbit can be just the right pick for you.
One of the pricier options on our list, HaasOnline offers an effective trading platform that combines expert trading functions with advanced security features, among other highlights. The asking price for this platform is a massive $250, so you know what to expect when you opt for this one. They can be excused for the high prices when you take account of their array of features, or so we feel.
So if you need a DCA bot that will guarantee you an extensive check and balance system while taking care of the technicalities of your trading, you can try out HaasOnline. You can customize the bots to suit your trading needs and specifications. And if you want a system of constant back checks, they can also be relied on.
Another highlight of their operation is the premium that they place on security. And it is perhaps the reason why a good number of crypto traders take side with it.
How Does DCA Work?
The first step involves choosing the cryptocurrency to deal with and the total capital amount that is set aside for your investment. This is followed by investing this capital in steadily increasing installments over a set time instead of staking it all at once. While you can do all this by yourself, DCA bots can save you the time and effort spent monitoring your assets’ movement in the crypto market.
You’ll get the best results when the market is experiencing a decline. And you can make huge profits by selling off these assets during a boom period. Although this is not always the case, you can get something closely related to what we’ve just described when using the best crypto DCA bots.
How to DCA in Crypto with a Bot
By trading with a Crypto bot, you can mitigate the risks that come with putting all your eggs in one basket. So you don’t end up on the losing side if a drop in price happens after you’ve made your purchase during a period of high prices.
The DCA bot uses a semblance of artificial intelligence to collect and analyze relevant market data while estimating the associated risks. Using the information at its disposal, it can buy or sell your cryptocurrency assets.
Can You Make Money with a DCA Strategy?
Take a scenario where you split a $5000 capital into a $1000 per month outlay for a period of five months. Assuming that the token prices fluctuate from a starting price of #100 each month to $90,$75,$80, and then $90 until the fifth month. This would peg your average asset price to an average entry price of $85. If you had gone all-in at the starting price of $100 per share, you would have missed out on a 20% savings in your overall investment.
This means that you can make money from using a bot when your intermittent purchases are perfectly timed to coincide with a period of decline in prices. With your savings from these purchases, you can sell your assets whenever there is a price boom. Your DCA strategy will monitor the highs and lows in the market flows and then move in swiftly whenever a window opens up to a period of low prices.
Advantages Of DCA Trading
One of the associated benefits that can be derived from using a DCA is the savings in time and effort that is spent in monitoring the market trends. All you need do is set the frequency of investment, and you can rest easy knowing that you’ve put plans in place to trade as at when due.
Another benefit is the potential for making significant savings on your investment capital. When you hold back on putting all your investment during a period of price boom, you can watch the tide sway back in your favor. This means that a portion of your capital will be plugged back in at intervals where the market prices will have settled.
The result is that you have money to invest in the system during a period of “low” prices, and you can capitalize on this event. The ultimate benefit is the reduction in trading risks that it allows by spreading your capital across several preset purchase points.
Are There Downsides to DCA?
If you consider the charges that accumulate over the additional purchases you make against an all-in purchase, you may argue against using a DCA bot. However, these costs pale compared to the potential profits you can get while trading in the long run.
Another issue with the DCA option is the possibility of missing out on a significant profit if the starting price is the best price throughout your investment. For example, if you put a large chunk of money into the market during a dip and it subsequently climbs massively for a huge return, you will lose out on that big payout when using a DCA.
You could even end up on the losing side if the entry price for your shares climbs up over this period, so it is not all bloom.
DCA bot trading is still a relatively new system of trading. So if you’re looking to test the waters with any of the options that we’ve previously listed, here are a few of the things you might want to know about it.
What is DCA bot
DCA Bot is a platform that allows you to make periodic cryptocurrency purchases. It uses a bot to make cryptocurrency purchases at user-defined intervals, thereby reducing the risks associated with the market price boom or bust.
Does DCA bot sell
If you configure it to sell at a set price point, your DCA bot will sell your assets. This happens when the user predetermines the parameters for the sale of their asset, and it could range from a price ceiling that is reached to a set time that is also reached. You can program it to sell in the fifth month following your investment, and it will sell off the prescribed number of assets, regardless of the price point at the time of sale.
Alternatively, you can set it to sell at a particular market price, and it will oblige you as soon as it hits the mark. And if you leave the decision-making to the bot, it will take charge, using its own collected data and system of analysis to sell at the right time and price.
Which is better, grid or DCA bot
A grid bot utilizes a technique of trading in which a system of grids with associated price points is employed in trading cryptocurrency. It is best suited to a market that is not headed in a particular direction, that is, a market that does not follow a trend or a pattern of movement. This is as opposed to other techniques used in trading, where traders thrive on a stable market with prices that can be determined.
On the other hand, a DCA bot attempts to evade the risks associated with investing in an unstable market. Although fluctuations in prices can be mitigated with a trading bot, it will yield the best results when the market prices trend downwards at the time of purchase and upwards at the time of sale.
It is safe to say that a grid trading bot has the potential for better returns on investment, as it responds better to market fluctuations.
Can trading bots lose money
The answer is yes, and we stop short of saying that it is an emphatic one. As most unentirely automated systems go, you will still have to call some of the shots and maybe miss the mark on a few occasions. It means that your chances of success depend on you fixing the right times to sell and buy. If you opt for the wrong strategy, the bot is not wired to object as it does not have a mind of its own.
So if the intervals that you fix for purchasing your cryptocurrency assets coincide with a period of high market prices, you could end up with a not-too-good deal. Your end of the stick will be shorter when your fixed purchasing time is the same time when the market is experiencing a period of steep prices. In these cases, your trading bot could lose you some money, depending on the amounts that are involved.
If you’re looking for a short term solution, a DCA bot trading system might not exactly be a good pick. The essence of a DCA trading strategy lies in the fact that it is sustainable in the long run.
How does 3Commas DCA work
3Commas DCA works on the principle of averaging your periodic investments on a medium-term trading basis. This is best served by a share price that dips below its starting price. However, the prospect of profit remains despite the current pricing, although the margin is not the widest. You can trade with a pair of bots(simple) or several pairs(composite), all at the same time. You can then choose from a short or long trading strategy.