As we keep telling you, there are many different ways to invest. However, when investing, we aim to increase the value of our money and make a profit, as every person would want.
Choosing the right investment instrument, if we are going to invest in the crypto sector, choosing the right crypto asset is very important at this point. In this case, we need to manage the process in the most calm and psychologically correct way. Coming to our topic, in this article we will introduce you to Dollar Cost Average (DCA) in order to minimize the general risks and the risks posed by the volatility of the asset.
What is Dollar Cost Averaging (DCA)?
DCA is the abbreviation for Dollar Cost Average system. This word is an abbreviation of the words Dollar Cost Averaging.
Dollar-cost averaging is an investment strategy that aims to reduce the impact of volatility in an investment instrument. If we use this strategy in the crypto industry, it allows us to purchase assets in equal amounts at regular intervals and at certain intervals (for example, twice a week).
This piecemeal purchasing process is much more advantageous than purchasing in bulk. Because purchasing at regular intervals keeps the price average on a line. In the long run, such a strategy will greatly reduce the negative impact of a bad entry price on your investment.
Why Use Dollar Cost Averaging? How does it work?
As we briefly mentioned above, the main benefit of Dollar Cost Averaging is to minimize the risk of investing at the wrong time. It aims to eliminate the "buying from the top" situation, as we often hear in the market. In this way, even if investors make losses in the short and medium term, they reduce costs by adding to their assets piece by piece and become profitable in the long term.
To give an example, let's say we have a budget of 10 thousand dollars and we think Bitcoin will rise. You will decide how this budget will be distributed. For example; We can use it to buy Bitcoin for $100 per week, per day, per month. Since we spread the purchasing process over a longer period of time, we will again minimize the risk.
We can increase or decrease our buy order by following the sector throughout the process we use this strategy. If we think in the long term, we will be the winners if the price rises because we constantly accumulate Bitcoin.
But remember that no matter what, there may still be risk in this strategy. Ultimately, we buy during a downtrend. For some traders, it may make more sense to wait for confirmation that the downtrend has ended and then start entering positions. However, in this case, when the rise is expected to start, the average price will probably be higher, but in return it may be possible to avoid many risks.
What are the Benefits of Dollar Cost Averaging?
Now that we understand the basic logic of this strategy, let's talk about its benefits.
Buying at the wrong time, that is, minimizing the possibility of "buying at the top".
To minimize the loss and risk by dividing investments into small pieces.
Easier progress in making investment decisions.
Increasing the possibility of making profits in the long run.
We have basically talked about the benefits in these articles, but never forget that the decision is up to you. However, we recommend that you review the situation of bad timing or investing in the wrong asset and then use it.
Now that we understand Dollar Cost Averaging in detail, let's see how and where we can implement this strategy. Binance, the world's highest volume cryptocurrency exchange, offers this service professionally.
How to Use DCA on Binance? (Step by Step Illustrated Explanation)
Binance, the leading cryptocurrency exchange that is mostly traded by investors, offers us many services. One of these services is our subject, DCA, or "Binance Recurring Purchase" as it is called in Binance.
<< Sign Up for Recurring Purchase Now >>
Now we will explain step by step how to use the Dollar Cost Averaging, or "Recurring Purchase" feature in Binance. To apply the DCA strategy on the world's most successful stock exchange, you can easily access the Binance Recurring purchase service through the website and application and grow your investment with this strategy.
In order to perform these transactions, you must first register with Binance.
Step 1: Log in to your Binance account and click on the credit/debit card option from the home page.
Step 2: Click Enable next to Recurring Purchase to activate the strategy.
Step 3: Select the fiat currency you want to use and the cryptocurrency you want to buy.
Step 4: Tap the date to set the frequency of your purchases, which are offered to you weekly, bi-weekly and monthly. You can also choose the day and time for Recurring Purchase. Click Confirm to save your preference.
Step 5: Choose your payment method. Click Change Card to choose from your existing cards or add a new card.
To add a new card, click on Pay with new card and enter your card information.
Step 6: In this step you will see the order details. Check in 1 minute and click Confirm. Additionally, the price and amount of cryptocurrency you will receive will be recalculated after 1 minute. You can click Refresh to see the latest market price.
Step 7: Once we process your order, you may be directed to this page. You can check your order status by clicking View history or Refresh.
Step 8: If your recurring purchasing plan purchase is now complete, you will receive a notification like this.
If your Recurring Purchase order fails, click Try Again to get a new quote.
The whole process is that simple, if you proceed step by step as in this article, you can enjoy this wonderful service offered by Binance, the world's highest volume cryptocurrency exchange.