Crypto exchanges are embracing auto-trading options to attract amateur and professional crypto traders to take advantage of the increase in adoption.
One of the upcoming auto trade facilities is Dollar-Cost-Averaging (DCA) bots available in reputable crypto exchanges such as OKX. Noah from Crypto Lists‘s editorial team explores the concept of dollar cost averaging and the unique offering from OKX’s DCA bot.
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Understanding the Fundamentals of Dollar Cost Averaging( DCA)
It is not a certainty that you get to time your investments at the most profitable moments. Experienced traders also have a challenge with market timing, especially on assets such as cryptocurrencies. The volatility of crypto is well documented. It is why dollar cost averaging is growing to be a popular investment strategy.
Dollar Cost Averaging involves dividing a lump sum of investment into smaller amounts invested separately at set intervals on multiple price levels until the exhaustion of the total sum. It combats crypto’s volatility by targeting a lower average investment cost while encouraging discipline in saving and investment. Traders get a better entry price if the market movement is against their initial trade. They can close a particular position once they attain their ‘take profit’ target.
Distinguishing Dollar Cost Averaging and Recurrent Buys
Some players in the investment space may consider these terms to be the same but they have distinguishing factors. The primary difference is the flexibility in DCA with recurring buys referring to consistent investment amounts at pre-determined intervals regardless of the asset’s price movement. DCA accommodates a take-profit or stop-loss strategy by dictating the buying price. It triggers buying orders by a fixed percentage drop in price while selling orders are triggered when it attains the take profit target.
DCA Investment Strategy Drawbacks
This strategy effectively lowers the investment risk and subsequently lowers the expected returns from a digital asset investment. There are also higher transaction costs due to investing in several small amounts in a period. This may dampen your potential gains further, especially due to the low returns.
Additionally, traders find it cumbersome to keep tabs on each investment interval. Monitoring each contribution complicates the investment process to take up a position. It is why crypto exchanges such as OKX have integrated DCA bots to assist traders to capitalize on this strategy.
Utilizing the DCA Trading bot
Traders profile themselves based on their risk appetite ranging from conservative to aggressive. A user sets up the take profit, stop loss level, and maximum order count. The take profit level is the percentage profit a trader wishes to attain in a trading cycle whereas a similar concept applies to the stop loss target.
Programming of the initial order sets its execution repeatedly. The bot executes a second trade as a multiple of the initial order if the price decreases by a predetermined percentage. The cycle continues until it attains the pre-determined take profit, stop loss level, or maximum order count. It only goes on to the next trading cycle if the take-profit level is attained.
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Unique Offerings with OKX’s DCA Bot
The OKX exchange has unique features that assist traders to implement the DCA investment strategy successfully. Critically, the exchange offers an enhanced AI strategy where the bot utilizes proven parameters and the digital asset’s characteristics. It includes the volatility of the asset for each pair in evaluating its risk profile.
The bot also uses technical indicators such as the RSI to facilitate flexible conditions for a trader’s entry time than limiting them in entering their position. It also facilitates continuous trading cycles due to safety orders.
OKX’s DCA bot also allows traders with a high volume multiplier who wish not to commit all funds to reserve only the minimum required funds. It includes the Initial order and First Safety Order. It enables them flexibility in transferring funds as required for a high fund utilization rate.
Accessing OKX’s DCA Bot
1. On the navigation bar of OKX, drift over Trade and select Trading bots.
2. From the list of bot trading strategies, select DCA bots and click on Spot DCA ( Martingale).
3. Pick your AI strategy based on risk appetite, ranging from conservative to aggressive.
4. Enter the amount for the bot to trade with and click Create for it to operate on the set parameters.
5. You can manually set the parameters.
6. Select Instant for the bot to start a new trading cycle or upon completing a previous trading cycle immediately.
7. You can set the bot to be triggered by a particular signal from technical indicators such as RSI for a new trading cycle.
Why not try it out for yourself? Sign up to OKX now!
Disclaimer: Crypto is extremely volatile and not suitable for everyone to invest in. Never speculate with money that you cannot afford to lose. The information on this site is presented for educational purposes only and should not be construed as investment or financial advice.
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