The Dollar-Cost Averaging (DCA) principle involves dividing investments into periodic buy or sell trades to achieve a better average entry price. In simpler terms, it means spreading out your trading funds over time to reduce the impact of market volatility.

General principle of the DCA strategy

Imagine you have $3000 in trading funds and decide to trade the EUR/USD currency pair at an exchange rate of 1.20. You plan to go long, expecting the euro to rise against the dollar. Rather than investing your full trading ****deposit at once, you divide it into smaller, timed trades.

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 broker deposit. 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.

How to use the DCA strategy

This strategy works best when you expect a strong one-way trend but want to smooth out entries during pullbacks. It is also well-suited if you’re ready to hold positions longer and close the entire series at Take Profit, rather than aiming for quick small gains. You can choose from two directions:

📈 In a long position, you speculate that the base currency will rise against the quote currency.

📉 In a short position, you speculate that the base currency will fall against the quote currency.

You can use the AI Preset to instantly set up your DCA strategy — all you need to do is choose the asset, position type, and investment amount. The system then automatically selects the optimal parameters for you. From there, you can pick one of three modes based on your risk level:

• Conservative — slower pace with more orders and wider spacing.
• Optimal — a balanced approach that combines steady protection with consistent profit potential.
• Aggressive — tighter steps and faster volume growth, aiming for higher potential returns while accepting higher risk.