Dollar Cost Averaging

MaiCoin

Modified on: Thu, 5 Sep, 2024 at 9:16 AM

What is the DCA trading strategy?
1. Dollar Cost Averaging (DCA) trading strategy is an investment method that involves increasing investment amounts when market prices fall and profit-taking exits when prices rise. Unlike simple periodic fixed-amount investments, the DCA strategy adjusts investment amounts based on market performance for better risk control and maximum returns.
2. Suppose you currently have a sum of money to invest in BTC, with a profit-taking exit at a 15% increase and an additional investment when the market falls by 5%. This is an example of applying the DCA trading strategy.
What market condition is the DCA trading strategy best for?
1. The DCA strategy is suitable for markets with higher volatility and a long-term upward trend. In such market conditions, DCA helps investors utilize price fluctuations more effectively for steady increases in investment returns.
How is the MAX DCA strategy different from regular dollar-cost averaging?
1. The main difference between DCA and regular periodic fixed-amount investments is that DCA not only involves fixed-time investments but also adjusts investment amounts based on market fluctuations. Additionally, it automatically exits when reaching the investor's predefined target profit, protecting investment gains.
How is DCA different from grid trading?
1. While both DCA and grid trading involve trading based on market fluctuations, their core principles and execution methods differ. DCA focuses on adjusting investment amounts based on market trends and profit-taking exits during market uptrends, whereas grid trading primarily involves trading within price ranges.
Why use a DCA trading bot?
1. DCA trading bots can execute investment strategies automatically, helping investors avoid emotional interference for more effective risk management and higher investment returns.
2. DCA trading bots can execute the DCA trading strategy again after each profit-taking exit (end of a round), preventing idle funds to maximize profits.
User Instructions
1. Find and tap "Robots" button on the main screen.
2. After entering the page, tap on "DCA Robot" and select the trading market from the top of the page.
3. Key points: Set the single amount, the percentage to add when the price falls (adding condition), the maximum number of times to add per round, and the percentage to exit when making a profit (profit-taking condition).
4. You can tap on the "K-Line" on the left tab to reference the market price trend over a period.
  1. Example: If the price ranged from $1,663,999 to $1,220,000 between January 15, 2024, and February 19, 2024, with an average daily fluctuation of about 1.2%, you can subjectively choose to automatically add funds when it falls by 5%, and automatically exit with a profit when the price difference reaches 30%.
    1. (This is an example for reference and does not constitute investment advice).
  2. Fill in the parameters - Fill in the parameters according to the previous example; the more times you set the maximum number of additions, the higher the total investment amount.
  3. After clicking "Create Now," the robot will start placing orders, trading 24/7! 5. Finally, you can check the performance of all robots at any time on the "Robots" homepage.

Detailed Explanations

How does the MAX DCA Robot operate?
1. You need to perform initial settings. Currently, MAX provides settings such as:
  1. Single amount: Refers to the initial investment amount and the amount for each additional investment. If you set it to 10,000 TWD, it means placing an initial order to buy virtual currency worth 10,000 TWD, and if additional conditions are met, buying virtual currency worth 10,000 TWD again. Since the price is lower at this point, the quantity of virtual currency purchased will be higher.
  2. Percentage to add when the price falls (adding condition): Refers to the condition for adding funds when the market falls by a certain percentage. If set to 5%, it means adding funds every time the market price falls by 5% relative to the initial purchase cost. Since the cost of additional purchases is lower at this point, the overall position's average cost will decrease with each addition.
  3. Maximum number of additions per round:
    1. Once the initial virtual currency is successfully purchased, the round begins; when the purchased virtual currency (including additional purchases) is sold, the round ends, and it is considered as completing one round.
    2. The maximum number of additions per round controls the maximum number of times funds can be added in each round. Even if the adding condition is met, additional funds will not be added once this limit is reached.
    3. If set to a maximum of 2 additions per round, it means that in one round, you can add funds up to 2 times before achieving a profit-taking exit.
  4. Percentage to exit when making a profit (profit-taking condition):
    1. Refers to exiting when the profit reaches a certain percentage relative to the average cost of the position.
    2. If you initially spent 10,000 USDT, purchased 0.2 BTC at a price of 50,000, the average purchase cost per BTC is 50,000 USDT. If the profit-taking condition is set to 10%, it means exiting when the market price rises to 55,000, resulting in a profit of 0.2 * (55,000 - 50,000) = 1,000 USDT, a profit of 10% (1,000 / 10,000).
      1. The above calculation example does not include trading fees.
  5. Round interval: The time interval between each round, from the end of one round to the beginning of the next. The default value is 1 minute, and users can adjust it according to their preferences.
2. After your settings are complete, MAX will place orders for you. A round will consist of one or more buy orders + one sell order. Once the initial buy order is completely filled, if the price rises to the profit-taking condition, then a sell order will be placed to exit at a profit.
3. How is DCA Profit Utilized?
  1. With each buy and sell round, you will gain DCA profit (the currency obtained from selling - the initially invested currency). The unique feature of MAX DCA Robot is that, after the sell order is completely executed, the currency released from that order is reinvested in the next round, maximizing capital utilization through compounding.
4. DCA Profit
  1. The total accumulated profit from the creation of the robot to the current moment, excluding changes in the market value of the currency within the robot.
5. Total Profit
  1. The current asset value of the robot (measured in the quote currency) - the initial asset value at the time of creation (measured in the quote currency).
Trading fee
1. Robot trading is subject to the same trading fee as manual / api trading, which varies by each user on its VIP level. For instance, VIP 0 users will have maker/taker fee rate of 0.045% / 0.15% applied on all trades. For more details, please learn more here.
2. It’s highly recommended that users pay trading fees with MAX Token, here’s why:
  1. You get 50% off on your trading fees (full rate applied if balance is insufficient).
  2. Avoid decrease of base currency amount in robot trading due to the restrictions of the minimum order size.
3. To enable trading fee discount
  1. Buy some MAX Token based on the expected fees generated from trading.
  2. Go to “Profile”, navigate to “Pay fees with MAX Token”, toggle on “50% off Trading Fees”
Limits related to robot creations
1. Maximum robots allowed: The maximum number of active grid robots per user (excluding terminated robots) is 2.
Details on robot statuses and when terminations are allowed?
1. The robot can have the following statuses: "starting", "running", "terminating", "terminated".
  1. "Starting": When the user presses the create button, MAX will begin the deployment process, and during this stage, the user will not be able to terminate the robot.
  2. "Running": After the initial deployment is complete, the status will transition to "running", during which the robot will conduct trades and allow the user to terminate it.
  3. "Terminating": Once the user requests to terminate the robot, MAX will cancel all orders.
  4. "Terminated": After the orders have been cancelled, funds will return to the user’s tradable balance, and the termination process is now complete.
Why is the current balance different from the actual total amount used in orders placed?
1. The difference between these two may be due to several reasons, including:
  1. A portion of the funds are held for future profit-taking.
  2. The precision limit of the trading pair results in residual balance that cannot be used for orders. This unused balance will be retained in the robot and will be returned to the "Tradable" balance after the robot is terminated.
Why is the DCA profit negative ?
1. In certain circumstances, value fluctuations in the base currency may not be factored into DCA (Dollar Cost Averaging) profits, but instead reflected in total profits.
2. For instance, if you purchase 0.000137 BTC, and 0.00000021 BTC is deducted as the trading fee, your net received amount is 0.00013679 BTC. When you set a profit-taking sell order for this 0.00013679 BTC, only 0.000136 BTC can be sold as the remaining 0.00000079 BTC is too small to be sold (based on the minimum order size on the MAX order book). The unsold 0.00000079 BTC will be reflected in total profits. This scenario results in the amount of TWD invested in the investment round being less than the amount of TWD received after selling, thus making the DCA profit for that round negative.
DCA Trading Example:
1. Suppose your DCA trading robot parameters are set as follows:
  1. Single amount: 1,000 USDT
  2. Percentage to add when the price falls (adding condition): 5%
  3. Maximum number of additions per round:
  4. Percentage to exit when making a profit (profit-taking condition): 10%
  5. According to the above parameters, you will have preallocated 3,000 USDT (1,000 * 3 buy orders = 3,000 USDT).
Terminating the robots
1. To terminate the robots, navigate to the robot details, press “terminate” on the upper-right corner. You will receive an email confirmation once the request is processed.
2. In certain circumstances, existing running bots will be terminated by MAX automatically. This includes, but is not limited to, the following situations:
  1. Your MAX accounts being closed or down-leveled.
  2. MAX periodically adjusts the minimum order quantity for each cryptocurrency based on market conditions. This applies to both bot and general trading. If a bot's order fails due to MAX increasing the minimum order quantity, MAX will automatically disable the bot. Please be aware of this.
Robots suspended
1. If your account is locked due to system security measures, your bots will remain in a suspended state.
2. Please check your email for an unlock link to unlock your account. Once your account has been unlocked, please contact max@maicoin.com and a specialist will restore your bots' trading status.
Robot Service Agreement