Dollar-cost Averaging (DCA) is a simple strategy to distribute funds into your portfolio as they are added to your exchange account.
An Introduction to DCA
Unlike rebalancing, dollar-cost averaging will only take the deposited funds to distribute them to the rest of the portfolio. DCA in Shrimpy will not rebalance all of your funds, just the new funds.
Shrimpy executes a Dollar-Cost Averaging strategy by following these steps:
- Detect a deposit.
- Determine the funds which were deposited.
- Use ONLY these funds to calculate the trades we need to execute to bring the portfolio as close as possible to the target allocations for this portfolio.
- Execute trades.
This strategy is useful for reducing the number of trades that are executed over time, maintain a set allocation for assets, and manage a diverse portfolio without excessive effort.
Setting Up DCA
After linking your exchange API keys, Shrimpy will begin collecting data from your exchange account. On your dashboard, you will be able to see all of your asset balances and the current value of your portfolio.
Once your API keys have been linked to Shrimpy, navigate to the "Automation" tab. On this page, you will see a big blue button to "Create Automation" if you haven't already created an automation for this exchange account.
That would look something like this:
Begin by clicking the "Create Automation" button.
Shrimpy will present a new page asking what type of automation you would like to create, followed by another that begins to show the different settings that can be enabled for the automation strategy.
Since we will be focusing on DCA for this tutorial, let's begin by clicking the "Pick Assets" button.
The "Select Asset" button will allow us to select the assets we would like to include in our portfolio. These will be the same assets that will be bought during each DCA event.
Notice that another convenient way to quickly allocate assets based on the current balances you have on the exchange would be to click the "Allocate from Balances" button. This will immediately pull your balance information from the exchange and display the percent allocations for each asset on your exchange account.
Note: you can still change the allocations even if you select this option. It's just a convenient starting point.
Once we select the button to "Select Assets" we will see the following dialog box.
In this dialog, we will select the specific assets we want in our portfolio. Don't worry if you forget an asset or two, you can always come back to this dialog at any time to select more assets.
You can see I selected a small portfolio of high market cap assets for this tutorial.
Now that we have our assets selected, we still need to pick the percentages we want for each asset.
These percentages must add up to 100% of your portfolio. Shrimpy won't allow you to save until you have allocated 100% of the portfolio.
You can see below how you can either drag the slider or input a percent in the input box field.
Once the percentages for each asset are selected, your portfolio would look something like the following.
Now that we have selected the assets to be included in our portfolio, it's time to enable DCA. This setting can be found by clicking the button to "Show more settings". This will expand to show some of the more advanced settings like DCA, Fee Optimization, and Spread/Slippage controls.
Expand this section so that your settings look like the following:
Now we should be able to see the option for "Dollar Cost Averaging". Go ahead and enable that setting by toggling on the slider.
This will be the only setting you will need to enable for your portfolio. However, if you would like, you can also enable "Fee Optimization with Maker Trades". This will reduce the fees you incur from trading over time as Shrimpy prioritizes maker trades.
Your page should end up looking something like the above image.
Now that we have enabled Dollar Cost Averaging, let's save the Automation strategy by clicking the "SAVE" button. Once we've done that, it will prompt us to name the strategy.
The last step is to select "Start Automation". This will present a popup that looks like the following:
In this popup, you should select the portfolio you want to use with DCA. Typically, if you will be depositing funds to the exchange account and want Shrimpy to DCA those funds as soon as the deposit is detected, you should enable the DCA on the "Default Portfolio".
If you want to learn more about Default Portfolios and how to set up multiple portfolios, you can read the help article here.
If you only have one portfolio, there is nothing to worry about, that one portfolio will automatically be your default portfolio, so you can just select the one that is available.
Note: If you don't want to rebalance after enabling the automation, don't check the box to rebalance. Also, make sure not to set a rebalance period if you don't want to rebalance in the future. You should keep the "Periodic" setting on "Never".
Have questions, comments or concerns? Feel free to reach out to us via the blue "Support" button found in the bottom left corner of your Dashboard, or send an email to Support@Shrimpy.io.