In this article, you will learn how you can create and start your first DCA bot and what other options are available for it.
Dollar-cost averaging (DCA) is a strategy where you can divide your investment across periodic purchases to get a better average entry price. This allows you to reduce the impact of volatility and price change on the overall purchase.
The main idea of the DCA bot is the repeated purchase of a coin in small amounts at price levels that are located evenly from each other. This approach minimizes the impact of the falling price on your open position.
When do I need to use the DCA bot?
You want to use the DCA bot when you need to cycle your trading with powerful technical signals and effective risk management tools, allowing you to completely automate your daily trading routine. Our DCA bot is a Swiss Army knife for automated trading, which outperforms the market on any time scale, whether you are a long-term investor or an intraday trader.
🔑 Key Takeaways
Here is a quick overview of what the DCA bot is able to do in particular:
Finding the right moment to enter and exit a trade based on one or more technical indicators.
Building a DCA orders grid for every cycle to get a better average entry price.
Reducing the trade size when it is needed for safe recovery.
Limiting your risks and drawdowns while letting your profits flow and grow.
👉 How to create a DCA bot
In this part, you will learn how to create and run your first DCA bot from scratch. Please, follow our step-by-step instructions below.
1. Exchange, trading pair, and the trading side
To start a new DCA bot, you need to click the [Start new bot] button located in the top menu of the Bots page.
You will see a pop-up window showing all the available bots that can be started. At this stage, you will need to select the DCA bot. This will reveal a new widget on the right corner of your screen where you will be able to adjust the settings of your DCA bot.
Select one of your connected exchanges, and pick the trading pair.
Choose the trading direction, you can create your DCA bot to open either a Long or a Short position. When ready, click [Continue] to proceed to other settings.
📈 Long: buying position where the bot will trade base currency to accumulate profit in the quote currency.
📉 Short (currently unavailable): selling position where the bot will trade quote currency to accumulate profit in the base currency.
📑 Note: The available balance is the balance the bot will use to create new DCA orders. The bot can use a maximum of 95% of your currently available balance, the rest is reserved to cover any trading fees taken by your exchange.
2. First order size and the trade start condition
Enter the size of the first order (aka initial position). This amount will be your first investment in starting the DCA bot.
Current value: The value of the first order (initial position) in traded currency.
Remaining balance: The remaining balance on the exchange account (in the bot's profit currency) after creating the DCA bot.
Now, you can pick one of the two available options which will determine how your DCA bot will enter the trade. It can be done instantly and your bot will finish after the first cycle is completed, or you can set repeated cycles which will be triggered when chosen indicators generate a signal for entry.
The instant option will create your DCA bot right after you fill in all your settings. Your position will be open immediately with all required DCA orders.
The bot will wait until indicator/s on the chosen timeframe will generate a signal. This option will require some time before indicators generate a signal for entry, while your bot will be created and set in the waiting status.
Sum. buy signals last 30d: How many signals have been generated for the selected indicator on a selected timeframe for the past 30 days.
To edit or change your current indicator, click the edit button (pencil) right next to the indicator:
Select any other indicator (if needed)
Click the plus icon
When finished, click the [Confirm] button to apply changes.
To add more indicators to your DCA bot, please click Indicators:
Select a new indicator from the drop-down list
Click the plus icon
When finished, click the [Confirm] button to apply changes.
Projected sum. buy signals last 30 days: How many signals have been created for the selected indicator in combination with already added indicators on the specified timeframe for the past 30 days.
📑 Note: Adding more indicators means that the bot will wait for the stronger signal to enter the position, but it also means that the waiting time before the bot is launched will be longer. The system will wait until all added indicators generate entry signals.
You can add extra options to your DCA bot such as setting a price range that will allow you to avoid buying at the tip and selling at the dip, or both. By default, the DCA bot has no limits at which price to buy or sell your coin, it will always follow the price and start a new cycle when required. Adjusting the maximum or minimum price, or both, will prevent that from happening - so you always trade in the price range you have set for your bot.
📑 Note: If the current price is out of your max. or min. price then a new cycle won't be started, the price should be within the set borders.
Click [Continue] when you are ready, and you will be moved to the next step where you can customize the settings of your DCA orders.
3. DCA orders
DCA orders are orders that will allow you to average the buying or selling price of the traded coin. Depending on your future settings, these orders help you to either take profit earlier (by reducing the average price) or increase the profit value (by increasing the position size):
Amount per order: The size of each DCA order.
Orders: The number of DCA orders.
Step: The price distance between DCA orders.
When you are ready, please click [Continue] to move to the next step.
Lowest buy/sell price: The price of your farthest DCA order. This is the price at which the last DCA order will be filled.
Weighted buy/sell price: Volume-weighted average price of your orders including the first order and all completed DCA orders.
Max. buy/sell value: Value of all your orders including the first order and all DCA orders. In other words, how much the investment is required to create a DCA bot and fill all DCA orders.
Remaining balance: The status of the remaining balance after creating the DCA bot.
4. Take profit
In this step, you will need to determine under what condition and at what price the bot should exit the position and take the profit. You can take your profit at a certain price set by a percentage value from the price of opening the bot; or set by a percentage value from the DCA price; or when the indicators generate a closing signal. The Take Profit order will be executed as a market order so the filled price may be different from the initial setup. Please, choose between one of the available options:
Take profit based on the price % change.
Take profit based on indicators' signals.
When ready, click [Continue]
You can select the Percent option if you want your profit to be taken at a certain or averaged price (after filling some or all DCA orders). The take profit order is executed via market order to guarantee that the position will be closed immediately.
To continue, specify the Take Profit % by which the price should change in the chosen direction, and select between Fixed or DCA mode:
Fixed: Take Profit is placed relative to the price of the first order.
DCA: Take Profit is placed relative to the volume-weighted average price of all orders.
For this option, we can estimate the profit that will be added to your available balance if the Take Profit is executed.
Weighted buy price: Volume-weighted average price of your orders including the first order and all filled DCA orders.
TP #1 w/o DCA: The Take Profit price of your initial position, without DCA orders.
TP #1 with DCA: The Take Profit price of your entire position including all DCA orders.
P&L #1 w/o DCA: Profit value of your initial position, without DCA orders.
P&L #1 with DCA: Profit value of your entire position including all DCA orders.
The Take Profit combined with Indicators will close the position when the chosen indicators generate a closing signal. When that happens, the bot will be stopped and sell the remaining position. If you have selected an entry with Indicators, then the bot will wait for a new entry signal to start over. Otherwise, (if the Instant option is selected) the bot will start a new cycle instantly.
To assign indicators to your Take Profit exit strategy, please click the Indicators tab, select an indicator that will generate a signal to close the position, and choose the timeframe.
Indicators may generate closing signals when not enough profit is generated - this may lead to unreleased profit potential or even loss. To avoid it, you can adjust some options and let the system ignore signals until a specified amount of profit is made.
To do so, click the Options, then Minimum profit, toggle the switch and Enable the option to skip the signal if profit is low. You will be offered two options, to take your profit based on the DCA price or the Fixed price. This works exactly the same way as described in the Percent Take Profit option.
📑 Note: We recommend using this option only for advanced traders who have knowledge about the pros and cons of trading by indicators' signals.
5. Stop loss (optional)
On the opposite to the Take Profit order where you can close the position with a positive outcome, you can also set a Stop Loss which will prevent your bot from any further losses and close the position when the price went in the opposite direction.
The stop loss will stop your DCA bot when the condition is met and sell/buy the traded currency to avoid any further losses. There are two ways to close the position using the Stop Loss: Exit and stop and Exit and wait.
It is possible to estimate the loss that will be deducted if the Stop Loss is executed.
Lowest buy/sell price: The price of your farthest DCA order. This is the price at which the last DCA order will be filled, for the first cycle.
SL with DCA: Stop Loss trigger price. This is an approximate price where the Stop Loss will be executed with a market order. Stop Loss can be only placed below/above the lowest/highest price relative to the first order price.
P&L with DCA: Approximate summary of the loss of all orders after executing the Stop Loss.
Risk reduction: Avoid taking extra funds from the available balance to start a new cycle after the stop-loss was executed. The new cycle will start with the remaining investment available from the previous cycle.
When ready, click [Preview bot].
🚫 Exit and stop
Exit and stop means that after your Stop-Loss is executed, the bot is canceled and it is moved in history. This way, reaching the stop-loss will prevent the system from starting a new cycle.
Just like with the Take Profit, you can set your Stop Loss to a Fixed loss or DCA loss:
Fixed Stop Loss: Stop Loss is placed relative to the price of the first order.
DCA Stop Loss: Stop Loss is placed relative to the volume-weighted average price of all orders.
⏳ Exit and wait
The Exit and wait is an option where you allow the bot to start a new cycle if the chosen indicator generates a signal. This may repeat numerous times depending on your other settings, such as the Drawdown limit. However, as mentioned before, this option is available only if you have chosen an option to enter the trade based on the signal that Indicators generate.
Extra options are available to give your stop-loss even more functionality. For the Exit and stop strategy, there is a trailing stop available which will move the stop-loss following the price. And for the Exit and wait strategy, there is an extra feature that will remember accumulated profit from all cycles and limit the losses based on the size of the open position plus accumulated profit.
The Trailing stop option will move the Stop Loss every time the price is changed by an X% in a favourable direction. It will move the Stop Loss by the set percentage.
P&L per step: Profit & Loss value of one step of the Trailing Stop. This is the amount of the loss that will be covered (reduced) from the initial SL each time it moves.
Steps to DCA breakeven: The number of steps your Trailing Stop needs to make before your Stop Loss is moved to the profitable area.
The Drawdown limit helps you to set a maximum possible reduction of your bot's funds by a specified percentage (including accumulated profit from the previous cycles) relative to their maximum value. The absolute drawdown sets a maximum loss relative to the initial investment (including all DCA orders).
The drawdown limit feature is only available if you enter the trade based on signals generated by Indicators. This option will stop the bot as soon as the maximum observed loss (specified in settings) has been accumulated as a result of hitting numerous stop-losses for a particular DCA bot.
1st max. drawdown price: The initial price at which the Drawdown Limit will prevent a bot from further losses.
Approx. loss amount: The approximate loss amount in the event of reaching the Drawdown Limit.
This is the final step of creating your DCA bot, no further changes need to be made. Here you can review all the selected settings and run your bot if they suit you. Click the [Confirm] button to create your DCA bot.
Now your DCA bot is successfully created and it will start working shortly! 👍