The Dollar-Cost Averaging (DCA) strategy divides your investment into periodic buy or sell trades to get a greater average entry price. You can reduce the impact of volatility and price changes on your overall position this way. DCA bots buy and sell coins repeatedly at evenly spaced price levels. It minimizes the impact of market changes on your open position.
General Principle of the DCA Strategy
Let’s imagine you have $1000 to trade. You choose the trading pair BTC/USDT. The current price is $29600. You want to start trading long, i.e., to buy cheaper, sell more expensive, and earn on the price difference.
You can enter the market with a whole volume of $1000. In this case, if the price moves lower, you will not be able to influence the result of the trade further because you do not have an extra budget for averaging the entry point. What would be a better strategy?
To enter the first order with only part of the budget, let’s say $40. The rest, $960, will be used to correct the average price (entry point). It will be our safety net. Suppose the price went lower to $29304, i.e., 1% down. If you buy more BTC at a new price for 40$, we will have 920$. In this case, our average buying price will be:
(29600 * 40 + 29304 * 40) / (40 + 40) = 29452$.
Suppose the price has fallen by 1% more, and the current value is $29011. You buy BTC again, but for $60, averaging the price even more
(29600 * 40 + 29.304 * 40 + 29011$*60$) / (40 + 40 + 60) = $29234
If the price goes up to $29526, that is +1% of the average price, and it will be a plus deal. See the illustration below:
It was just a general principle of the DCA strategy. Using Sema, you can automate and customize your strategy with technical indicators and effective risk management.
When should I use the DCA Bot?
You should use the DCA Bot when you want to automate your daily trading routine with powerful technical signals and effective risk management tools. It’s like a Swiss Army knife for automated trading that beats the market, whether you’re a long-term investor or an intraday trader.
🔑 This is a quick overview of the DCA strategy’s benefits:
- Making DCA orders grids for every cycle to improve average entry prices. Reducing the trade size when necessary for safe recovery.
- Keeping your risks and drawdowns low while letting your profits flow.
- Reducing the overall impact of price volatility and lowering the average cost per share.
- Preventing a poorly timed lump sum investment at a potentially higher price.
- Versatility: beginners and advanced investors can both benefit from dollar-cost averaging.
In the DCA strategy, you can choose between long and short positions:
📈 In a long position, the bot buys the base currency to profit in the quote currency.
The bot opens a position by buying the base currency. A DCA (buy) order is set below the trade, and a Take Profit (sell) order is placed above it. As the price climbs, the bot sells the base currency at the Take Profit level, yielding a profit.
📉 In a short position, the bot sells the base currency to profit from it.
The bot initiates by selling the base currency. Take Profit (buy) order is placed below the DCA (sell) orders. If the price rises, the bot sells more to gain quote currency. Conversely, if the price falls, the bot repurchases the base currency at a profit. The cycle restarts with the initial base currency investment.
Launching a DCA robot
There are three options available in Sema to start the robot:
1. Launching a robot from the list of prepared robots that are tested on historical data
2. Launching a robot from a Trading idea prepared by our analysts
3. Manual robot adjustment
Customize the DCA bot and make it your own unique trading tool. See the full instruction for manual robot adjustment here.
Let’s start the robot from the prepared list.
Go to the “Trade” section and scroll until “Tested by history.” Here, you will find the list of robots our analysts prepared.
Choose a robot, find out more about its strategy and other details in its description, and press “Use robot.” If you do not have the needed currency, you can swap others right in the app by pressing the swap icon at the right of the investment field. You can customize your strategy with manual adjustment.
Enter the amount of the investment.
Please note that bots can use up to 95% of your current balance, and the rest is reserved to cover exchange fees.
How to swap the cryptocurrency?
To swap the currency, enter the amount you want to swap, press “Preview” and then “Confirm” if everything is right.
Then enter the amount of the investment and press “Start robot”.
Track the robot’s performance
You can check the robot information and track the results in the “My robots” section on the Home page. There, you can view:
- The trade chart
- The history of trades
- The profits chart
- Values
Bot orders
To see the bot orders, open the history of traders of a needed robot, and press on the trade you want to learn more about. Scroll down, and you will see the details, namely:
- Reason
- Avg. buy price
- Avg. sell price
- Amount
- Account
- Purchase fee
- Sales fee
- Total
- Used safety orders
- Trade number
- Start time
- End time
How to stop the robot?
To stop the robot, press on the robot settings button, and choose “Stop the robot”. Then confirm your decision by pressing “Stop robot” once again.
When stopping the robot, you will have to choose the way you want to do with the coins that are in an active trade. You can:
- Convert them to USDT by market
- Return all coins without converting them
If you have any issues or questions about the DCA robot or its strategy, you can always contact our support team.