How To Set Up DCA On BONKbot

Nobody wants to buy at the top or sell at the bottom, but you’d best believe it happens all the time.

What if there were a strategy to help you build a solid crypto portfolio sustainably.

Three magic words - Dollar-Cost Averaging (DCA). 

What Is Dollar Cost Averaging (DCA) In Crypto?

Dollar-Cost Averaging (DCA) is a investing strategy:

DCA is investing a fixed amount of money into a specific cryptocurrency at regular intervals even if price fluctuates.

Think of it like this:

Instead of trying to time the market and buy a large chunk of Bitcoin (BTC) when you think the market is low, you buy a small amount of BTC every week, every month, or whatever interval you choose.

Some people do it when their salary comes in, which seems pretty logical.

In the crypto context, DCA boils down to just consistently buying a set dollar amount.

This means you end up buying more crypto when the price is low and less when the price is high.

Over time, this can average out your purchase price, potentially reducing the risk of making a large investment right before a price drop.

Example Of Dollar-Cost Averaging

Imagine you have $1,200 that you want to invest in BTC over the next year. Instead of buying $1200 worth of BTC right now, you decide to use DCA and invest $100 per month.

Here's a hypothetical scenario:

After 12 months, you would have invested $1,200 and accumulated approximately 0.0314 BTC.

Now, let's say you tried to time the market and invested the entire $1,200 in Month 1 when BTC was $30,000.

You would have purchased 0.033 BTC. That would have been nice.

However, what if you’d waited for the market low, and you missed the dip in Month 4 when it was $20,000?

Suddenly it’s $40,000 in Month 5 and never gets that low again.

When you start is important, but more important is just getting started and sticking to it for the long term.

The market will move regardless, but if you commit to your DCA strategy, you will accumulate your investment over time. 

Does Dollar Cost Averaging Work?

Over time, DCA as an investing strategy has proven successul time and time again. In my opinion, DCA is a solid tactic because it offers some protection from the high volatility that is commonplace in the crypto world.

Here are some more solid points to back up DCA's effectiveness.

• It reduces emotional investing: DCA removes the pressure of trying to time the market. You're not constantly worried about buying at the peak, which can lead to impulsive decisions

  
  

• It averages out the purchase price: By buying at different price points, you smooth out your average cost per coin. This can be particularly advantageous if you're investing in a cryptocurrency that experiences significant price fluctuations

  
  

• It’s an easier entry point: DCA allows you to start investing with smaller amounts, making it more accessible for beginners. You don't need loads of money to get started, just allocate a small bit of your salary or surplus income each month to your DCA strategy

  
  

• It potentially mitigates risk: By spreading your investments over time, you reduce the risk of buying a large amount of crypto right before a market downturn

  
  

DCA isn't necessarily about maximizing profits, it's more about minimizing regret and saving your sanity in a frankly crazy market.

How To Implement DCA In Your Investing

Here's a simple, step-by-step guide for a DCA BTC investing strategy:

1. Determine your investment amount: Decide exactly how much money you're comfortable investing in Bitcoin (or another cryptocurrency) over a specific period. For example, you might choose $50 per week or $200 per month

   
   

2. Choose your interval: Select how often you want to make your purchases. Weekly or monthly are common choices, but you can adjust based on your preferences

   
   

3. Select a crypto exchange: Choose a reputable cryptocurrency exchange that offers automated recurring purchases. Many popular exchanges like Coinbase, Kraken, and Binance now offer this feature

   
   

4. Enter your details: Combine steps 1-3 and proceed by specifying the cryptocurrency you want to buy (e.g., BTC), the amount you want to invest per interval (e.g., $50), and the frequency (e.g., weekly). Next, get ready to confirm your setup

   
   

5. Confirm and automate: Double-check your settings and accept your recurring buy order. The exchange will then automatically purchase the specified amount of BTC at your chosen interval. Your job here is done

   
   

Here’s an optional step, this one is totally up to you.

Periodically review your DCA strategy to ensure it still aligns with your financial goals i.e. reduce or increase your DCA amount, or the frequency of your investment.

Drawbacks Of DCA

While DCA offers several benefits, as we’ve clearly outlined, it's still not without its drawbacks, and that’s why more active and experienced traders tend not to use this strategy:

• Missed opportunities: If the price of the cryptocurrency you're investing in consistently rises, you might have been better off investing a lump sum upfront. DCA can lead to lower overall returns in a consistently bullish market

  
  

• Fees: Transaction fees associated with each purchase can eat into your returns, especially if you're investing small amounts frequently. Look for exchanges with low fees or consider consolidating your purchases into less frequent, larger transactions. This won’t be an issue with big exchanges like Binance and Kraken, but if you go for lesser-known platforms or through brokers, you will pay more

  
  

• Opportunity cost: The money you're using for DCA could potentially be invested elsewhere, such as in stocks or other asset classes, which might offer higher returns. This is something to be aware of

  
  

Here are some alternative investing strategies to consider:

• Lump-sum investing: Investing a large sum of money upfront, hoping to capture the full potential of a rising market. This is riskier but can be more rewarding, especially in a bull market.

  
  

• Value averaging: Adjusting your investment amount based on the performance of your portfolio. If your portfolio is down, you invest more; if it's up, you invest less. This is more complex than DCA.

My Opinion On DCA

Dollar-Cost Averaging is a useful investment strategy for managing investment risk and building a sturdy cryptocurrency portfolio over the long term.

Personally, I think it's the best strategy for retail traders, we're regular people with full-time jobs and realistically, we don’t have a lot of free time to get involved and follow the markets.

This way, we can get on with out lives while still stacking satoshis.

Personally, I also love DCA because it takes out the emotional aspects of trading. I just keep my head down and focus on making money to fund my portfolio.

However, if you're looking for short-term, high-risk, high-reward opportunities, DCA might not be the right fit.

You can even use DCA on BONKbot. Read on for our guide!

How to Set Up DCA

Open BONKbot in Telegram and navigate to the “DCA” option.

You can place a DCA Buy or Sell order by selecting the "DCA" option on the menu, choosing "Buy" or "Sell," and then setting up the interval and duration for your order.

It’s really that simple, but let’s zoom in further.

How to DCA Buy on BONKbot

1. Click "DCA" in the Buy Menu: A green check will confirm the selection of your order type.

   
   

2. Set Interval: Enter the desired interval between each DCA transaction (in seconds, minutes, hours, or days).

   
   

3. Set Duration: Enter the total duration for your DCA order (in seconds, minutes, hours, or days).

   
   

4. Review Your Order: BONKbot shows the final order details for user confirmation, including the number of orders, amount per order, and total amount.

   
   

5. Set Max/Min Price (Optional)*: Click "Add Max/Min Price" to set a maximum or minimum price for your buy orders.

   
   

6. Click 'Confirm': Once satisfied with the setup.

How to DCA Sell 

Follow the exact same steps as DCA Buy (see above), but select "Sell" instead of "Buy".

Extra: DCA Buy and Sell Information

You can customize both the interval between each DCA transaction and the total duration of your DCA order. You can input these values in seconds, minutes, hours, or days.

While the minimum interval and duration start at 1 minute by default, there's no specified maximum.

Note that BONKbot divides your total order amount by the number of transactions (calculated from your interval and duration) to determine the amount for each DCA transaction.

BONKbot DCA Fees

Fees are determined by the network and will have to be paid according to the fee settings you choose, in combination with the network fees required to execute your transactions. 

Remember to always review your order details carefully before confirming, and consider the potential price impact, especially for larger orders or less liquid markets.

DCA Order Management and Execution

BONKbot users can view their active DCA orders in the “Position Management” screen.

This screen displays a list of your ongoing DCA orders, including their progress and remaining duration. From here, users can also cancel or modify any ongoing DCA order, if they wish to.

It’s important to be aware that if the market is closed or illiquid during one of your scheduled DCA transactions, BONKbot will still attempt to execute each transaction at the specified interval. If a transaction can't be completed (because of market conditions), it will be skipped or delayed until the next pre-set interval.

FAQ: Price Impact and Limits

How does BONKbot handle price impact for DCA orders? 

BONKbot estimates the price impact for each DCA transaction. If the estimated impact is high (e.g. 5.5% per order), it will warn you and suggest increasing the interval or duration.

Can I set a maximum price for my DCA Buy orders? 

Yes, you can set a maximum price by clicking "Add Max/Min Price" during the order setup. You can specify this limit using either a price value or a market cap value. This will protect you from overpaying for digital assets.

What happens if the price exceeds my set maximum during a DCA Buy order? 

If the price or market cap exceeds your set maximum, that particular DCA transaction will not execute. The order will continue with the next scheduled DCA transaction.

Can I set a minimum price for DCA Sell orders? 

You can set a minimum price for DCA Sell orders, similar to the maximum price for Buy orders. Minimums can be a good way to avoid underselling cryptocurrencies. 

Finally, let’s explore some of the additional features.

BONKbot DCA: Additional Features

If you’re interested in seeing some DCA order analytics or summaries, you can view your open positions by clicking DCA Orders on your home screen. From there, you can navigate to the “Open Order Position Management” tab, where you can see all of your open orders, their progress, and can cancel any open orders.

We also have Limit Orders for BONKbot, and we can confirm that they can be combined with DCA if it aligns with your strategy. You can also use DCA together with Auto-strat, if you wish. 

Note that there is no maximum number of DCA orders you can have open, as long as you have the funds to execute your orders.

So, feel free to keep opening concurrent positions. If you don’t have the funds, your orders will stop until you have the necessary liquidity.

Otherwise, they’ll automatically cancel after a certain time period.

Please be aware that some approaches carry significantly higher risk than others and are not suitable for everyone.

Do your research, and only invest what you can safely afford to lose.