TL;DR: This blog discusses Warren Buffet’s enhanced version of dollar-cost averaging, which achieves a remarkable 30% improvement compared to the traditional method, all without requiring any additional time from you.

You saw it right. We have a 100% win-rate trading strategy for you.

It is simple and requires a little to zero knowledge to get started.

Sounds too good to be true? Don’t believe me? We included a backtesting result at the end.

It is based on the trading strategy by Warren Buffett, but better.

Using this strategy, you will be blown away by how well your portfolio performs, even during a bear market.

Warren Buffett’s dollar-cost averaging strategy

Now we have entered a bear market. It doesn’t look good on our portfolio these days. However, bear markets can be a time of opportunity — to buy stocks cheap.

Buffett is a firm believer in value investing, which means investing in stocks below their intrinsic value. His simple investment philosophy that anyone can adapt and use earns him impressive investing returns every year.

Simply by investing in undervalued companies can get you billions and billions of wealth like buffett.

However, the questions, “How do you know if a stock is undervalued?”

Use dollar-cost averaging

The simplest, but flawed, solution to that question is — “Dollar-cost averaging”.

Dollar-cost averaging is an investment strategy where you invest a set dollar amount on a set schedule, e.g. monthly, regardless of the stock prices.

The idea is that you’re investing in stocks that are always rising, e.g. Apple or the S&P500.

Dollar-cost averaging may not be perfect, because there could be times that you bought at the top. However, it is still effective because most people don’t have the time to research companies or study charts and financials.

Plus, we humans have a tendency to think we can buy stocks at an even cheaper price, which often causes us to miss out on good investment opportunities.

Value Averaging — The Improved Way

But what if we could take dollar-cost averaging to the next level?

That’s where value averaging comes in. It’s a more advanced strategy that invests more when the share price falls and less when it rises.

For example, suppose you determine that the value of your investment will rise by $100 each month as you make additional investments.

In the first month, you invest $100, say at $10 per share.

In the next month, you determine that the value of your investment will rise to $200.

If the current price is $15 per share, your original position is worth $150 (10 shares times $15), which only requires you to invest $50 to put the value of your investment at $200.

This strategy helps to minimize timing risk and generally produces higher investment returns over the long term.

In certain circumstances, if the market value of your stocks rise above your expected value, it could even require you to sell some shares.

Therefore, instead of investing a set amount each period, the value averaging strategy makes investments based on the total size of the portfolio at each point.

A healthy economy comes in cycles, by investing with a value averaging strategy to catch every market turmoil, it generally produces significantly higher investment returns over the long term than dollar-cost averaging.

TradeDots Value Averaging — The Best Way

Here comes the strategy that can spot stocks when they are undervalued and perform even better than value averaging.

TradeDots is a TradingView reversal indicator that identifies market reversal points based on historical price action analysis. It can help you identify the best buying times for stocks by providing signals when a stock is undervalued and has the potential to reverse.

The strategy is very simple. Overlay the indicator on the chart and make entries only when the indicator shows a reversal signal, that also indicates undervaluation.

By overlaying the TradeDots indicator on charts for stocks like Apple and the S&P500, you can see that there are about 1 entry opportunity per month.

You simply ignore sell signals and invest whenever a red dot appears on the chart, even if the price breaks out from the entry point. It is because the recovery period is quick.

Now let’s talk about the results.

If you had used the dollar-cost averaging strategy with a monthly investment of $10,000 from January 1, 2013, to September 1, 2023, you would have invested a total of $1,268,000 and earned a return of $615,170.24, which is about a 48% return over the past 10 years.

But if you had used the TradeDots value averaging strategy with the same investment amount of $10,000 per trade, jumping into the market whenever there’s a signal, you would have earned a total of $998,852.97, which is 78.04% return, 30% higher than the traditional DCA strategy.

This is why it is a 100% win-rate strategy that outperforms Warren Buffett.

Isn’t it easy and effortless?

The Bottom Line

TradeDots value averaging strategy is a game-changer. It’s easy to use, doesn’t require extensive knowledge, and can significantly increase your investment returns. So why not give it a try? You can even try the indicator for free using this link.

Remember, the results will show with time and compound interest. So start implementing this strategy today and watch your portfolio soar.

About TradeDots

TradeDots is a TradingView indicator that identifies market reversal patterns through the implementation of quantitative trading algorithm on price actions. Try our 7-day FREE Trial to level up your trading game.

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Disclaimer: The information provided in this article is for educational purposes only and should not be considered as financial advice. Trading involves risk, and it is important to conduct thorough research and seek professional guidance before making any investment decisions. Prospective investors are encouraged to perform their own due diligence or consult a financial advisor before making investment decisions.