Dollar-cost averaging is investing a fixed amount at regular intervals regardless of price, which smooths out your average entry cost over time.
Dollar-cost averaging, or DCA, is a strategy of investing a fixed dollar amount on a regular schedule, such as $100 every week, no matter what the price is doing.
Because you buy more units when prices are low and fewer when prices are high, your average cost tends to smooth out over time. This removes the pressure of trying to time the market perfectly.
DCA is popular because it is simple, disciplined, and reduces the emotional temptation to buy at peaks or panic-sell at lows. It works especially well for volatile assets like cryptocurrencies.
The trade-off is that in a steadily rising market, investing a lump sum early can outperform DCA. The strategy is more about consistency and risk management than maximising returns.
Suppose you invest $100 each month. In month one the price is $50, so you buy 2 units; in month two it drops to $25, so you buy 4 units. You have spent $200 for 6 units, an average cost of about $33.33 — lower than the simple average of the two prices ($37.50).
It depends on the market. DCA reduces timing risk and smooths your entry, while lump-sum investing often wins in a steadily rising market because more money is exposed sooner. DCA is mainly about discipline and managing risk.
There is no single correct interval; weekly, fortnightly and monthly are all common. The key is consistency, so choose a schedule you can stick to and that fits your income and trading costs.
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