Once you’ve established a routine of Cost Averaging, becoming comfortable with the mechanics and record-keeping, one option is to segue into trading by using technical indicators to adjust your regular investments.
Your goal should be to adjust your allocation down during periods when the market is overbought and the reverse when the market is oversold.
There are a variety of indicators you might employ to do this, you’ll need to do the adequate research to decide which you think is best. You might use Standard charting tools like Moving Averages, Relative Strength Index (RSI) or Bollinger Bands.
You might also rely on an external indicator to inform the adjustments, which you feel correlate with price, such as the US Dollar Index (DXY).
The DXY is a measure of the value of the US Dollar relative to a basket of currencies of major trading partners. It tends to have an inverse relationship with Bitcoin and the wider crypto markets, as dollar weakness pushes investors to look for assets that are a better store of value, such as Bitcoin.
Any indicator or model can be used, it just depends on the value you feel it holds. The Stock-to-flow model created by Crypto Influencer, Plan B, is another popular tool. As price moves above and below the price predicted by his model, you might adjust your DCA purchases.
TIP - Where you deviate from your regular purchases
make sure to indicate this in your records, along
with the rationale used.
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