What is Dollar-Cost Averaging? and how to profit from it.

Dollar-cost averaging is a trading technique that can be very dangerous or make a fortune. Imagine if you will you see a stock or commodity falling. Most people will SELL at that point, but you can post small buy trades to the stock.

Then, when the commodity starts climbing again you start making more profits.

In the chart shown the green lines show the buys on the way down. When the market changes direction I stop buying.

It is imperative with this type of trading that you do not use leverage. The issue is that if the market doesn’t come up soon enough you have to be able to handle the losing trades.

If you buy Bitcoin for instance at 45000, 44500 and 44300 and then it goes down to 33000 you have to be able to keep the trade open. if your leverage is 100 to 1 it won’t have to get far before your trade is costing you a lot of money. Without leverage, you can hold all the way to zero. So it’s really important.

The key here is to minimise risk and maximise profit.  Only use this form of trading if you are putting smaller amounts in the drop. You can buy again on the way back up but I tend not to do that.

When do I stop buying?

I use MACD on the 4-hour chart, when MACD turns back up I no longer buy. I look for a breakout above the previous high and move stops up behind the price as it rises – so if there is a sudden drop I keep my profits.

Again, don’t use any leverage and you will be able to succeed with this, also learn to use MACD and to read charts. If you can identify a trend you can buy the dips and build-up for the big breakout.