The Elirox trading strategy operates on the Dollar-Cost Averaging (DCA) principle, which involves dividing investments into periodic buy or sell trades to achieve a better average entry price. This strategy spreads out your investments over time to minimize the impact of market volatility. Elirox's AI optimizes the settings of this strategy for any asset, ensuring optimal performance of the bot. To maintain clarity and transparency, let's break down how the DCA strategy works:
Imagine you have $3000 and decide to trade the EUR/USD currency pair, where the current exchange rate is 1.20 (1 EUR = 1.20 USD). Your strategy is to go long on the EUR/USD pair, meaning you expect the value of the euro to increase relative to the dollar. Instead of investing all $3000 at once, you split it into smaller purchases over time.
You start by purchasing 0.01 lots of EUR/USD with $1000 when the exchange rate is 1.20. This initial purchase gives you exposure to the market.
Suppose the exchange rate drops to 1.1980 (a 0.17% decrease). You decide to purchase an additional micro lot at this lower rate, using another $1000 from your account. Now, with a total of 0.02 lots, your average buying price becomes:
$Average Price = \frac{(1.20 \times 0.01) + (1.1980 \times 0.01)}{0.01 + 0.01} = 1.1990$
If the exchange rate continues to decline to 1.1960, you purchase another micro lot for $1000, further adjusting your average buying price:
$Average Price = \frac{(1.20 \times 0.01) + (1.1980 \times 0.01) + (1.1960 \times 0.01)}{0.01 + 0.01 + 0.01} = 1.1980$
By contrast, if you used all your investment at once, your average price would be 1.20, resulting in potentially lower profit afterward.
You should use the DCA Bot when you want to automate your daily trading routine with powerful technical signals and effective risk management tools. It’s like a Swiss Army knife for automated trading that beats the market, whether you’re a long-term investor or an intraday trader.
With the DCA strategy, you can choose between long and short positions:
📈Long Position (Buy Position)
In a long position, you speculate that the base currency will strengthen against the quote currency.
📉 Short Position (Sell Position)
In a short position in Forex trading, you speculate that the base currency will weaken against the quote currency.