DCA vs Averaging Down: The Difference Matters

DCA can reduce timing risk, but "averaging down" can destroy portfolios. Learn the difference and use simple rules to avoid emotional DCA traps.

Planned DCA is systematic. Emotional averaging down is not. The difference protects your capital.

Planned DCA (healthy)

• Fixed schedule
• Fixed amount
• Max allocation rule
• Periodic review

Emotional averaging down (dangerous)

• Increasing size after losses
• Ignoring changing fundamentals
• Concentrating too much in one asset

Rules that keep DCA safe

• Set a max allocation per asset
• Set a max number of DCA steps
• Do not increase size emotionally
• If you wouldn’t buy it today, stop buying it

Tools:

• Average Buy Price Calculator
• PnL Calculator

Related guides

• DCA Strategy Explained
• DCA Checklist