Dollar-cost averaging: flat vs risk-weighted

Dollar-cost averaging (DCA) is the practice of investing a fixed amount on a fixed schedule — say $100 every week — no matter the price. Because you buy across many different prices, your average cost smooths out, and you avoid the trap of committing everything right before a downturn. It is the simplest way to take emotion and market-timing out of investing.

Why DCA works

A single purchase exposes you to timing risk: if you buy at a local peak, you wait a long time to recover. Spreading the same capital over weeks or months means some buys land high, some land low, and the average sits in the middle. You give up the upside of perfectly timing the bottom in exchange for never suffering the downside of buying only the top.

Flat vs risk-weighted

• Flat DCA invests the same dollar amount every period — the classic approach.
• Risk-weighted DCA multiplies each buy by a tier (up to 5×) based on the 0–1 risk metric: more when risk is low, less when risk is high. The schedule stays automatic, but more capital lands in historically cheap zones.

Risk-weighting requires keeping dry powder for low-risk periods and accepts that you may invest less during long uptrends. Whether the trade-off pays off depends on the asset and period — which is exactly what the simulator lets you test.

Try the simulator

Backtest both strategies on Bitcoin, Ethereum, and other coins with the DCA simulator.