The Common Problem of Beginners
Suppose you have $100 to invest in a cryptocurrency that you believe will increase in value. Your goal is for it to reach $130.
The mistake many make is to invest the entire $100 at once when the coin is worth $100.
What happens if the coin decreases in price? If the coin drops, let's say to $90, you've already used all your money and have nothing left to buy at a lower price. If the coin then rises back to $100, you won't have gained anything because it simply returned to the same point where you bought it.
The Smart Strategy: Gradual Buying
Instead of putting all your money in at once, the strategy suggests dividing your investment and buying the coin at different times, especially if the price drops. This is called "averaging" or "dollar-cost averaging".
Practical example:
Imagine you have $100 to invest and want to buy the coin when it is worth $100.
Initial purchase: Instead of spending the entire $100 at once, you decide to buy just a part, for example, $20.
Coin at $100: You buy for $20. You have $80 left in cash.
If the price drops, buy more: If the coin decreases in price, you take the opportunity to buy more, allowing you to have a lower average purchase price.
Coin drops to $95: You buy $15 more. You have $65 left in cash.
Coin drops to $85: You buy $15 more. You have $50 left in cash.
Coin drops to $80: You buy the remaining $50. You are left with no cash.
What did you achieve with this?
By buying at different times while the price was dropping, your average purchase price is no longer $100. It is now much lower, approximately $87!
The Great Advantage of This Strategy
Profit without reaching the goal: If the coin, instead of rising to $130, only returns to its initial price of $100, you would have already gained approximately 15% on your investment, or about $15. Why? Because your average cost was $87, and if you sell at $100, you are earning the difference.
Why is This So Important?
You reduce risk: You do not put all your money at a single point, which protects you if the price drops.
