I've been experimenting with a 'buy the dip' strategy that follows this logic :
Set aside $200 every month. When the RSI on a daily chart dips below 30, invest all the cash you have set aside.
Surprisingly, on stocks and indices that are at their ATH, it gives the same return (or slightly better) than DCA. But on assets that are nowhere near their ATH, it gives the same return as DCA, but with lower drawdowns.
I put a few examples here: https://imgur.com/a/i2EdmNT
I tried it on dozens of assets (no overfitting), and my observations are consistent across all my tests.
Do you think there's a point doing this over DCA? Or DCA is by nature almost unbeatable over the long run?
A simple 'Buy the dip' strategy that (almost) BEATS DCA
byu/NormalIncome6941 ininvesting
Posted by NormalIncome6941
3 Comments
The advantage of DCA is that no thinking is required. Doesn’t sound like your strategy performs significantly better enough to warrant the time and effort to monitor price action.
So more work and “almost” beats? Why bother?
Mathematically it makes sense. But are you going to be around to place the order when the dip occurs or do you have automated trading to place it for you?