Trader builds Bitcoin 'buy the dip' bot, outperforms DCA

Published at: Feb. 8, 2022

While a bullish backdrop emerges in February, spare a thought for the traders trying to time the market. One savvy trader by the name of Samjhill on Reddit has built a trading tool that outperforms dollar-cost-averaging (DCA) for buying Bitcoin (BTC).

DCA is the strategy in which investors buy a small amount regularly regardless of price fluctuations. It works in contrast to traders keen to get the lowest entry, timing the dip to perfection and avoiding “catching a falling knife.”

The aptly named “Buy the Dip Bot” aims to “get the best price for a given asset by using a limit strategy.” Inspired by another Redditor who suggested a manual limit-buy-order strategy for getting the best price entry, Sam took the idea one step further, coding up a dip buying bot.

The bot places limit orders at several intervals below the current price and if an order gets executed or canceled, it starts again. Using tech from AWS, Python, Lambda, DynamoDB and React.JS while hosted on Github, the cost to run is low, “about $5 per month.”

While the bot has been beavering away since December, it hit a maiden milestone yesterday. Reaching profitability versus regular dollar-cost averaging, “the price-per-coin advantage is about (cheaper) 5-10% right now, which you could also think of as getting that much more coin for your money,” Sam told Cointelegraph.

The bot runs a backtesting library to work out the best entry points for the limit buys. A complex process, the work paid off, culminated in a “winning strategy.”

When asked by Cointelegraph if he would recommend the bot as opposed to regular DCA, Sam replied it depends on where you are in your BTC journey:

“For people just starting out, regular DCA probably makes more sense, since your goal is probably to stack as many coins as possible. For those later in their journey, they might have a decent stack already and want to minimize increasing their cost basis, and so might benefit more from this."

Sam, who first learned of Bitcoin around 2013, added that he is doing both DCA and the limit strategy "to get a more even curve of coin growth.”

While the future is currently Bitcoin orange for the trading bot, Sam built the system for easy integration with other coins. Ethereum (ETH) features on the Github page, and Sam hints he may roll out other coins to production.