Paste the prices you bought at — or the ones you plan to — and see the average cost a fixed-amount schedule actually produces, next to the plain average of those prices.
Keep the amount per buy at 250. Replace the prices with 100, 100, 100, 100, 100. The five buys invest 1,250 and accumulate 12.5 units, so average cost and the simple mean both equal 100. Then restore the original prices and explain why the answers differ. These hypothetical inputs omit fees, slippage and taxes; the last-price value is not a return forecast.
A fixed cash amount buys more units when price is low and fewer when it is high, so the resulting average cost is a harmonic mean rather than an arithmetic one — and for positive prices the harmonic mean is no greater than the arithmetic mean. They are equal when all prices are equal, and otherwise the harmonic mean is lower. In the default example, five $250 buys at 100, 80, 60, 90 and 120 give an average cost well below the 90 arithmetic average of those prices.
It is not a return-maximising strategy. Studies of lump-sum versus staged investing generally favour lump sum in markets that drift upward, because time in the market beats averaging into it. DCA buys something else: it removes the single largest behavioural failure — putting everything in at a high and nothing in at a low — and converts a timing decision into a schedule you can keep.
Fix the amount and the interval in advance, write them down, and do not adjust the size based on how you feel about the last candle. A schedule that changes with sentiment is discretionary trading wearing a process costume.
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On average, and in trending markets, lump sum has historically produced higher returns. DCA reduces the impact of a single bad entry and makes the plan easier to follow, which is why it persists.
Any fixed one you will actually keep. Weekly and monthly are common; the interval matters far less than not abandoning it during a drawdown.
Yes — selling a fixed amount on a schedule smooths exit price the same way, and removes the need to call a top.
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