Definition

Dollar-Cost Averaging (DCA) is an investment strategy that involves purchasing a fixed dollar amount of an asset at regular intervals, regardless of price. This approach spreads entry points over time and may reduce the impact of short-term volatility.

DCA is commonly used in long-term investment strategies.

Example in Context

An investor buys $500 worth of Bitcoin on the first day of each month. Over time, this spreads purchases across different price levels rather than attempting to time the market.

FAQs

Does DCA eliminate risk?

No. While it may reduce timing risk, market volatility and long-term price changes still affect outcomes.

Is DCA only for long-term investors?

It is commonly used for long-term strategies but may also be incorporated into automated trading systems.

Can DCA be automated?

Yes. Many platforms allow recurring purchases or strategy-based DCA logic.

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