A Redditor has developed an automated dip-buying bot that outperforms the dollar cost average into Bitcoin by about 10%.
Traders who are trying to time the market during February’s positive background should keep this in mind. When it comes to buying Bitcoin, a Reddit user by the name of u/Samjhill has developed a trading technique that exceeds dollar-cost averaging (BTC).
Investors use DCA to acquire a modest amount of stock each month, regardless of price changes. Instead of trying to “catch a falling knife,” this strategy focuses on getting in at the lowest possible price.
Buy the Dip Bot is a trading method that tries to “obtain the best price for a given asset by applying a limit strategy.” When another Redditor proposed using a manual limit-buy-order method to acquire the best price entry, u/Samjhill decided to take the idea one step further and develop a dip-buying bot.
When one of the bot’s limit orders is executed or cancelled, it starts over from the beginning. Amazon Web Services, Python, Lambda, DynamoDB, and React.JS, all hosted on GitHub, all contribute to a low running cost of “around $5 per month.”
On Monday, the bot achieved a first-of-its-kind accomplishment. “The price-per-coin advantage is roughly (cheaper) 5 percent – 10 percent right now, which you could also view of as getting that much coin for your money,” Sam said to Cointelegraph.
For the limit purchase, the bot uses a library of backtests to figure out the optimal places of entry. In the end, a “winning approach” emerged from a labor-intensive procedure.
Asked if he would recommend the bot over conventional DCA, Sam said it depends on where you are in your Bitcoin journey:
“For people just starting out, regular DCA probably makes more sense since your goal is probably to stack as many coins as possible. For those later in their journey, they might have a decent stack already and want to minimize increasing their cost basis and so might benefit more from this.”
After discovering Bitcoin in 2013, Sam said he uses DCA and the limit technique to “achieve a more even curve of currency growth.”
Sam created the trading bot to be compatible with various cryptocurrencies, even though the future is now Bitcoin orange. The GitHub website mentions Ether (ETH), and Sam teases that other coins may be added to production in the future.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.