In this article, we explain what Dollar Cost Averaging is.

What is Dollar Cost Averaging?#

Dollar Cost Averaging is a technique for either averaging your buying price or recouping losses on a losing position. The idea is that the price of a currency will eventually rise. By consistently doubling your investment, your average buy price will be lower. With a lower average buy price you will profit sooner when the price does rise. You do need deep pockets for this technique, as you will need to keep doubling down on your investment.

Beginners can also use DCA to invest over a longer period gradually. You invest $1,000 every 30 days for five months. If prices at the end of each month were $100, $90, $80, $70, and $95, your average asset price would be $85.5. If you invested the full amount initially, you would’ve paid $100 per coin.