The Future of Crypto Trading: an Insight into DCA Bot Technology

Distributed Cost Average is a term generally used to decipher the abbreviation DCA. However, there is another way of deciphering it. It also means Dollar Cost Average, a term which was coined by Benjamin Graham in 1949. ADCA crypto bot is a special script that uses this particular approach to execute any given technical analysis strategy.

Note that some technical analysis approaches work better than others with this type of bot.

How a DCA bot works

Distributed cost average refers to an approach in financial management where an investor buys a certain asset in separate instances. While some investors believe that the right move is finding the dip and buying in bulk, DCA buyers usually start buying on a downtrend and make a series of purchases over a relatively long period of time.

By distributing a single purchase across multiple trades, an investor hopes to reduce the average price of assets in their portfolio to maximize potential profits. While buying in bulk on a dip is a more profitable approach, it is also associated with many risks that DCA tries to mitigate.

• Finding the dip is hard. Many technical analysts can predict the market’s general direction based on price action alone, but identifying the moment when an asset reaches a certain low is not possible. You can try to estimate and use all sorts of tricks like Fibonacci lines to determine the next low, but it is still an educated guess at best.
• Buying in bulkexposes your portfolio to immediate risks. When you make a big purchase, any market movement right after the finalization of your deal will expose your portfolio to greater risks. What if your assets start losing value after you buy them?
• A big purchase may work as a self-fulfilling prophecy. If you buy a lot, the market may believe that there is more value right now than there is. The price will surge shortly, but the retracement will be way harder and more devastating.

Distributed cost average users hope to avoid these risks. A crypto DCA strategy is a controllable approach to accumulating resources or opening short-term market positions over a certain period of time.

How much does a trading bot cost?

The cost of investment for automation is a very complicated matter. Since the industry is relatively young, identifying the “correct” service price is quite hard. The market is not mature enough to deliver a good feeling of what the median should be.

We believe that any automation vendor that delivers a high-quality product should be judged based on your perception of price. If you think that a paid plan provides enough value for your hard-earned dollar, go for it. The best crypto trading bot costs as much as you can pay for it!

However, we should say that there are several factors that one should consider before making a purchase:

• A good bot provider is reliable. It means that the service is available 24/7 without any hiccups or failures. A good company uses cloud services provided by huge corporations such as Amazon Web Services.
• You should be able to test-drive the product. A free trial is great, a free plan for new users is even better. For example, WunderTrading is an automation vendor that has a free plan that allows users to run up to five bots and test most features.
• Pricing should be flexible. Companies like WunderTrading understand the segmentation of their clientele. There are optimal options for individual users and corporate clients interested in diversifying with automation.

What is a DCA bot?

A DCA bot is a script that receives a signal from an analytical platform or its user and acts on it using a preset algorithm that can be tweaked according to your preferences. The algorithm dictates how many sequential market positions a bot should open, how much it can spend on each, and where to place stop loss and take profit orders.

A DCA buying bot can be used on the spot market and with a margin account. In the first case, you will be able to accumulate certain assets slowly by buying during downtrends. In the second case, DCA is a way to game the market by opening multiple positions protected by stop-loss orders.

A good DCA strategy should be based on using multiple signal generators that provide you with a good indication of the price direction in the nearest future. Take a look at what the TradingView community created specifically for people interested in DCA day trading.

Should you use DCA bots?

Some experts believe that DCA bots can be used as a secondary income stream for retail traders who want to diversify and have some portion of their portfolio fully managed by automated systems. DCA is a classic approach to dealing with volatile and value-accruing assets. Automation simply made it much faster and more efficient.

Before dedicating a significant portion of your portfolio to this method, we strongly recommend you get a free account at WunderTrading or other automation firms offering free plans and practice. There are many other avenues to explore if you are interested in bots.