Expanding on DCA - A take on Dynamic Dollar Cost Average
The ₿inochet DDCA way of investing
Disclaimer, I am not a financial advisor, I am merely a helicopter pilot. Always do your own research and be extra cautious to where you invest your money.
Perspective:
To understand this first of all, keep in mind the audience it is mostly directed to. The average wagies that have a fixed, finite amount of cash to invest in monthly, but also bother with news, technical analysis, market scentiment, stocks/commodities, on chain analytics, log models etc. Basically someone in the same boat as I am, that has above average understanding of the crypto market and that doesn't ape in without research.
This doesn't necessarily apply to people loaded with cash/crypto, you guys made it already so it is a very different ball game. Not that it cant be used, it just wouldn't matter in my opinion nor would it be that impactful. This method also assumes that technical and financial analysis has some impact. If you don't believe that, this is also not for you. TA works this cycle because bitcoin (and all the shitcoins following it) is behaving less volatile with institutional adoption-that's my guess on why ta is more meaningful this cycle.
Less volatile doesn't mean not volatile, the volatility though is decreasing, that's a fact, higher market cap = higher price = less volatility.
Differences:
Traditional DCA is taking into consideration averages and the superiority therein, contrasting with timing the market and waiting for the final dip to go all in. You have 2-3x times a week that you DCA, maybe 4-5 times per week. That depends in your budget and monetary fiat allocation. Assuming TA works, or any form of financial analysis and awareness of multiple markets and factors across them is helpful, this is the logical step forward.
If you assume ta/fa doesn't work then we might as well be all wrong and whatever we do doesn't have an impact whatsoever unless lady luck smiles upon us.
But it does, and it works, otherwise you all wouldn't be here. Luck can help you so much right?(I'm not saying luck isn't a factor that should be taken into account, but its not the ONLY factor).
To the point -eventually:
Ill explain first and provide an example.
I DCA in increments in the week according to my analysis. This analysis includes multiple technical indicators like RSI, moving averages, gold price, dollar price, major stock movements, crypto news, and geopolitical/economic news across the globe and many more. You need to have the discipline. You need to put in the time.
I don't count only on candle red candle green omg price oversold etc. You can see from the get go that this isn't for lazy crypto degenerates, you have to work for it as well. And the whole point I started looking into this, is the fact that I didn't like the idea of "blindly" putting money 3x a week into 'X' assets. Additionally, which asset that you want to DCA into has a massive impact on the method as well because I also do my due diligence in risk management. The riskier the asset, the less I will DCA into it so take this into consideration as well.
Now that you have some information on what goes in the background before I click green button that buys magical net coins, ill give some examples.
For arguments sake, I have a monthly capital of x amount, in this example: 1000 USD, that will be my investment capital for the month. That 1000 USD is bought into stablecoins as soon as my monthly payroll comes in. (This is an example btw, for simplicity reasons I'm not giving away the amount I put because its not of importance)
According to all of the above variables and research, which is an ongoing thing, I start plotting my weekly buys. 1000 USD divided by 4 is 250 USD per week. BUT If there is an opportunity, I will be getting a loan from the following weeks DCA money. This is mostly done in downtrends like the summer one and the more recent dump.
That's it? No. The term "dynamic" comes not only from that but from filling orders in increments.
Example - long one, bare with me:
Its a nice Monday morning and Bitcoin is at 40k and burgerland decides to sell. Now it drops down to 37. A conditional clause comes to play at this point. Have I bought in those levels previously? Yes? Then I MIGHT not DCA. This assumes that 37 will either hold or drop, it doesn't really matter. If it holds, I have orders on those levels in bitcoin. How about eth then since Bitcoin blessed us with a nice dip? Oh look, Eth at 2.3k. Repeat the question: Do I have orders in that range? And am I happy with them? Yes? Move to other asset. Rinse repeat.
IT IS A MATTER OF IF/THEN STATEMENTS AND CONSTANT ANALYSIS.THATS.IT.
Continuing the prior Bitcoin example, we are now at 37k.
Cool, what if I never bought on those levels, nor am I happy with previous buys? Amazing glad you asked. You start buying BUT you buy with increments. 10% on the first "dip" of the asset. You analyze and assess and decide. What if it drops more? Depending the drop I adjust my increment. So if its a massive capitulation drop, I might put more. If its just a retest I'm allocating 5-10% for example. If the asset is on a downtrend ill be more conservative because more lows could come. But you don't wait to time the dip, that's the beauty. You are still filling buy orders.
MAYDAY MAYDAY! 37k breached two days right after and its now 35k, what do? Easy. You repeat the questions above again, all while still doing your analysis. This time you might decide that 10% isn't enough and you should put 15-20% (varies according to your analysis it goes hand in hand) ok faggot but its still Wednesday and we might drop more. Yes, but the price will never be going ONLY down and ONLY up. We assume that either a relief rally will come, a bounce, a retest, anything on that sorts AT SOME POINT(you don't have to know that point exactly it doesn't really matter because we are dealing with weekly buys broken down). And it will come, just like it came now and I'm not buying on those levels because I already filled my bags prior weeks on lower prices. And here comes "lending from next week" premise " also into play.
Lets recap and carry on:
Monday comes and Bitcoin 40k drops to 37
Buy 10% of the allotted DCA money of the week
Thursday comes and Bitcoin drops to 35 from 37
Buy 15% of the allotted DCA money
Sunday dump comes and drops to 33k
Buy 25% of the allotted DCA money of the week.
You have now spend 50% of the weeks DCA money and you reassess the situation. Can it drop lower? Are you willing to take that bet? Yes? Doesn't matter you have cash at hand. Can it NOT drop lower? Doesn't matter you bought already.
If you are feeling confident, you could get a loan from the following week and go with a bigger percentage and not buyback on the retests in the following 1-2 weeks in the month.
This model assumes constant proper analysis and awareness, and a monthly staple amount funneled in stablecoins, ready to fill your orders.
The only downside I see is that it requires a massive effort and constant research rather than DCA Wednesday Saturday and Sunday(those were my DCA days when I used to only DCA the traditional way)
This isn't tested for long but so far it has helped me perform spectacularly well. I hope you can understand the point I'm coming from with this strategy, and not misinterpret it as something else. Its still DCA just much, much, much more complicated.
Your friendly neighborhood helicopter pilot, ₿inochet