A DCA bot automates dollar-cost averaging: buying a fixed amount at regular intervals, or buying an additional tranche each time price falls a set percentage. The average entry price improves as price drops, and the timing decision disappears.
The schedule version
Buy $500 every Monday regardless of price. Over time you accumulate more units when price is low and fewer when it’s high, and your average cost sits below the average price. This is the passive investor’s tool, and it works because it removes the temptation to time.
The drop-trigger version
Buy when price falls 3% from your last entry, and again at the next 3%. This is the trader’s version, and it’s a different animal. It adds size specifically when the position is losing.
Where it becomes averaging down
A drop-trigger bot can’t distinguish a pullback from a breakdown. Both look identical to a rule that buys every 3% decline. In a genuine downtrend the bot does the worst possible thing — increases exposure as the case for holding weakens. On leverage, that path ends at liquidation.
The version that works
Accumulation that knows what market it’s in: buying only when conditions support the direction, pausing when they don’t, sizing each tranche against current volatility rather than a fixed percentage. That requires a model of the regime, which a schedule can’t supply — the rule-versus-model distinction covers this fully.