🚨 ARE YOU TIRED OF LIQUIDATIONS 🚨
Dollar-cost averaging (DCA) is a strategy employed by traders to mitigate risks and potentially improve the long-term outcome of their investments. Here are the two approaches you mentioned:
DCA on the Dip: This involves incrementally investing in an asset when its price drops to a significant support level within a high timeframe zone. It’s based on the premise that the asset will eventually rebound.
DCA on a Loss: This is when traders invest more into an asset that’s currently losing value, often with the hope that it will recover enough for them to break even or profit.
The latter can be particularly risky because it may lead to compounding losses if the asset continues to decline. It’s generally advised to avoid doubling down on losing trades unless there’s a strong, rational basis for expecting a turnaround. Instead, having a clear invalidation point where a trade is exited can help prevent larger losses. It’s essential to have a disciplined approach and not let emotions drive decisions in trading.