Dollar-cost averaging
What happens if you buy the same dollar amount on a fixed schedule, whatever the price is doing?
In plain words
Dollar-cost averaging is investing a set amount of money at regular intervals, such as weekly, regardless of price. Because the amount spent is fixed, more units are bought when prices are low and fewer when prices are high, so the average cost per unit sits between the highs and lows.
Why it matters
It removes the need to choose a single entry price, which matters in a market that can swing widely within one week. It also means a falling market keeps filling orders at lower prices, so a plan must be funded for weeks when the position loses value before it gains.
In a real week: BTC, week of 4 June 2018
In the week of 4 June 2018, BTC opened at 7714.26 and closed at 6764.99, a fall of 12.31%, with a range of 17.25% between the high of 7765.0 on Thu 7 June and the low of 6622.81 on Sun 10 June. A fixed weekly purchase split across days would have bought noticeably more units near the week's low than near its high, and 3 of the 4 prior weeks were down.
A common mistake
Thinking dollar-cost averaging lowers risk or guarantees a profit. It only smooths the purchase price; the asset can still fall far and stay below the average cost for a long time.