This is an investment Strategy in which an investor divides up the total amount to be invested (buy or sell) across periodic purchases (daily or weekly) of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset’s price and at regular intervals; in effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of assets at the best prices. Although it is mainstream referred to as Dollar-cost averaging (DCA) – we call it Repeats – it can also be referred to as Rand Cost Averaging or as the constant Rand plan.

Related Article: Cryptocurrency Trading Strategies: Buy & Hold Strategy

Cryptocurrency Trading Strategies: Repeat (Rand Cost Averaging) Strategy

The Repeat (Rand Cost Averaging or DCA) Strategy overview, what it means, how it works and how YOU can benefit. So many traders make the mistake (and some pay dearly) of simply gambling on cryptocurrencies. With some basic common sense and a few tips from reputable sources, you can easily build a portfolio and benefit from a cryptocurrency wealth creation mechanism such as bitcoin. How easy is it? It is not easy, but it is not out of reach either. You need to choose a strategy that is right for YOU.

How does it work?

You first need to build up a balance of Rands (to buy crypto) or Crypto (to sell for Rand) in your account by depositing rand or depositing crypto. You select a trading pair (currently BTC/ZAR, BTC/USDT and BTC/NGN are available for the repeat strategy). 

• • LIMIT
  • MARKET
  • STOP-ORDER
  • STOP-LIMIT
  • REPEAT

Select Repeat.

You then make your strategy to either Buy or Sell

Using the BTC/ZAR pair as an example you can set a DCA strategy as follows:

Note: Once confirmed the Repeat Limit Order will be created immediately (and use the time of day stamp for Daily and Weekly trades)

Examples:

I would like to BUY R1000 of Bitcoin split over 4 weeks with a Limit order

{this will now place 4 limit orders at the weekly interval specified for a Fiat total of 250 per order}

 OR 

I would like to SELL 1 Bitcoin split over 4 weeks with a Limit order

{this will now place 4 limit orders at the weekly interval specified for a Fiat total of 0.250BTC per order}

How do YOU Profit from the Repeat (DCA) Strategy?

The repeat strategy does improve the performance of an investment over time, but only if the investment increases in price. Furthermore, the strategy cannot protect the investor against the risk of declining market prices.

What are the Risks and Benefits of Rand Cost Averaging?

You always need to do due diligence on your investment decisions, consequently choosing the right strategy is very much dependent on your personal circumstances. Be careful when taking advice from friends and family and be sure to do your own research. Everyone has a different financial position, earning power and risk appetite. Make sure you know what your personal parameters are. Do not be blinded by untold riches. If you have R500 a month (which you can afford to lose if everything goes wrong) then this may be a good strategy for you. If you only earn R5000 a month it would be a very risky decision.

Risks of Rand Cost Averaging

There will be different opinions about risks, but we are all human and are all susceptible to fear and doubt. Placing a strategy and then quickly selling in desperation after a flash crash is a familiar occurrence for many. Also, remember that life circumstances can change, this can force you to close a position early. Do you have a balanced basket of investment and savings to protect you in such an event? If not, then cryptocurrency trading is not the answer.

DCA Benefits

You have more control over your exposure to long-term investment and as a result, can manage your risk better. This means that you are more confident in your strategy the further down the line you get because you are able to measure your success along the way to your goal. With this mindset and some, you can take advantage of dips in the market and create more options to trade by averaging out your buying price. This also means that you are more in tune with the market.

A potential benefit is to reduce the overall impact of volatility on the price of the target asset. Consequently,  as the price will likely vary each time one of the periodic investments is made, the investment is not as highly subject to volatility.

Allows an investor to avoid making the mistake of making one lump-sum investment that is poorly timed with regard to asset pricing

What do you need to do?

If you decide you want to try the repeat (DCA) strategy you should:

1. Make sure you have verified trading accounts on reputable exchanges such as iCE3X (do not use credit cards or PayPal)
2. Always store your bitcoin in a secure non-custodial wallet, furthermore preferably a hardware wallet – designed for long-term storage
3. Use google alerts to receive an email whenever there is movement in the particular coin market you are interested in
4. Have a plan and stick to the plan. If you do not have the means or financial discipline, this strategy is not for you.

Notes:

• A limit order will only execute at the price you specify otherwise, as a result, it will stay open until cancelled or executed
• If your BUY price matches an existing SELL price, your order will be matched immediately.
• After matching, your order is not completely filled, as a result, the remainder will be left as a partial buy order in the order book.
• If your BUY order is not matched with an existing SELL order, it will be listed with other orders waiting to be filled in the order book. There are no fees for placing multiple buys and sell orders at different prices

PRO-TIP:  You can create, cancel and accept as many orders as you want, play around with the numbers to make your orders more attractive to other traders. 

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