How to Trade Dogecoin: A Step-by-Step Guide
Comprehensive Guide to Trading Dogecoin in 2021
Looking for an entry point into the exciting world of dogecoin trading? We'll help you though it.
Dogecoin trading is pretty straightforward once you get the hang of it.
The popular cryptocurrency, Dogecoin, enjoyed an eventful period in the first months of the year. Until October 2021, the meme digital asset has managed gains of over 13,350%.
As such, the digital currency is now firmly ranked as a top 10 crypto - in terms of market capitalization. If you want to take advantage of these price fluctuations, it might be the right time to learn how to trade Dogecoin.
You can trade the DOGE coin against fiat currencies such as the USD, as well as other crypto-assets like Bitcoin.
In our extensive How to Trade Dogecoin Guide - we have put together everything you need to know about this digital asset.
We will start with the trading fundamentals, the different orders to use, risk management, and how you can find a broker to trade Dogecoin asset online.
Trading Dogecoin digital currency is no easy feat - which is why we have put together an in-depth guide on How to Trade Dogecoin in 2021. Within it, we explain the ins and outs of how this investment scene works, what risks and rewards you need to consider, and how you can start trading Dogecoin today.
How to Trade Dogecoin in 5 Easy Steps
To trade DOGE, the first step is to Open an accout with a regulated exchange, depost funds, select Dogecoin from the platform list, and lastly Buy Dogecoin (go Long) or sell DOGE (go short).
Step 1: Open an account with a regulated crypto broker
Step 2: Funds your account with a debit/credit card, e-wallet, or bank transfer
Step 3: Choose how much Dogecoin you want to trade
Step 4: Buy DOGE (go long) or sell DOGE (go short)
Step 5: Confirm the trade
This guide on how to Trade Dogecoin will break everything down in Layman’s terms so that you do not trade blindly. But, if you don’t quite have the time to read it all of the ways through, this is what you need to do to trade Dogecoin now.
What is Dogecoin Trading?
Dogecoin (DOGE) is a digital asset that enables you to send and receive funds with ease.
The digital currency was launched as a joke in 2013, satirizing the frenzy around cryptocurrencies at the time. As such, there are no unique features or characteristics that set this coin apart.
However, Dogecoin has since improved its image to become a friendlier alternative to Bitcoin. Thanks to social media mentions by famous supporters such as Elon Musk, the coin's value has been experiencing a steep surge in recent months.
Today, it is deemed as a stepping stone to the crypto world.
As with the other cryptocurrencies, the value of Dogecoin fluctuates throughout the day - sometimes, even by the second. When trading Dogecoin, your aim is to speculate on the price of DOGE coins in the future.
If Dogecoin is in high demand, then the price of the digital currency will rise. If more and more traders are trying to cash out their Dogecoin holdings, the price of the coin will fall. Being able to predict these price fluctuations is how you make a profit when trading Dogecoin online.
Here is a practical example to clear the mist:
- Let's say Dogecoin is valued at $0.0560.
- You will find this denoted as DOGE/USD at cryptocurrency platforms.
- Believing that Dogecoin is undervalued, you place a $1,000 buy order.
- A couple of months pass and the digital asset is valued at $0.0700.
- This translates to a 25% increase in value.
- You place a sell order to exit the trade at a profit.
In this example, we saw the price of Dogecoin increase from $0.0560 to $0.0700 in a matter of two months. This leaves you with a profit of $250 on your $1,000 stake.
Put simply - if you speculate correctly, Dogecoin trading comes with high-profit potential. On the other hand, if your speculation is wrong, then it is a different story altogether - leading to a loss on the trade.
Consequently, before you begin to trade Dogecoin online, it is paramount that you are educated about the ins and outs of this specific market.
How Does Dogecoin Trading Work?
If you are already familiar with trading conventional assets such as stocks and commodities, you will have no trouble learning the ropes of Dogecoin trading.
However, the notable difference is that unlike traditional tradable assets, digital currencies have around been only for a decade or so. As such, the factors that determine their price shifts are also slightly different.
For instance, along with supply and demand, you will also have to consider blockchain development and regulations imposed on various markets.
With this in mind, this section of our How to Trade Dogecoin Guide will go through some of the trading fundamentals to clear the mist.
Dogecoin Trading Price Movements
In order to trade Dogecoin successfully, you need to have a firm grasp on what drives the price of the digital asset.
These days, you can find Dogecoin listed on most cryptocurrency platforms. If more traders are going long on the asset, then this will be reflected with an overall increase in the price of the coin.
On the contrary, if the general feeling towards the digital currency is to go short, then the value of the coin will also go down.
As you might notice, the price of Dogecoin might vary slightly at different cryptocurrency platforms. One broker might quote you $0.0594, whilst at another, the coin might be priced at $0.0596.
However, this difference is nothing to be worried about and will not affect your ability to place profitable trades in any way.
Dogecoin Trading Pairs
As we covered in the introduction, Dogecoin trading is facilitated through crypto pairs. You can trade the digital asset against both fiat currencies as well as other cryptocurrencies.
Let us start with 'crypto-fiat' pairs - a term that you will come across quite a lot in the Dogecoin trading space.
- For instance, when you see a DOGE/USD pair, it means that Dogecoin is traded against the US dollar.
- In this case, DOGE is the 'crypto' and USD is the 'fiat'.
The US dollar, being the benchmark fiat currency, is most widely used when trading cryptocurrencies.
That said, some online brokers will also give you access to other crypto-fiat trading pairs such as DOGE/GBP (British pound), DOGE/EUR (euro), DOGE/CAD (Canadian dollar), and even DOGE/JPY (Japanese yen).
Trading Dogecoin against fiat currencies also invites the advantages of high liquidity and tight spreads. Moreover, it is easier for traders to quantify profits and losses as well as speculate on the exchange rate.
For this reason, crypto-fiat currencies are considered a more suitable option for novice traders.
The other option is to trade Dogecoin against other cryptocurrencies such as Ethererum or Bitcoin. However, this requires having a solid knowledge of both the competing coins and their respective markets. As you can guess, this might be complicated for new traders.
To summarize - whether you choose to trade Dogecoin against a fiat currency or other cryptocurrencies, you have to arm yourself with the specifics of the assets in question.
Long or Short-Term Trading
Before you start speculating on Dogecoin, you should first consider which financial instrument is most suited for your trading goals. You have two options in front of you - to invest in cryptocurrency in the long-term or trade the asset in the short-term.
For instance, if you feel certain that Dogecoin has a promising future ahead, then you can consider investing in digital coin in the long run. In this case, you will be buying the coin in the traditional sense and storing them in a crypto-wallet.
This way, you can hold on to Dogecoin for months or years - until you think it's the right time to cash out and collect your profits. In the cryptocurrency world, this strategy is popularly known as 'HODLing'.
On the other hand, short-term strategies demand a strong understanding of technical analysis to support your decision-making process. For new traders in particular, this will be a challenging undertaking.
Learning to read charts and other technical indicators will require a considerable amount of time. Therefore, if you are a newbie - then a 'buy and hold strategy' will be an easier approach.
This way, you do not have to worry about the short-term volatility of the Dogecoin market.
That said, if you rather prefer the idea of making modest profits on a regular basis - a short-term strategy will be more to your liking. If this is the case, it is best that you stick to liquid pairs such as DOGE/USD or DOGE/BTC.
Read Also: Crypto Predictions for 2021: Where to Invest
Trade and Own Dogecoin
As we discussed in the previous section, if you want to trade Dogecoin in the long term - you can adopt a 'buy and hold strategy'. When looking to buy this digital asset, it is best to purchase coins directly through an online broker rather than a cryptocurrency exchange.
You can find a plethora of online brokers offering Dogecoin on their platforms. But it is always best to choose a regulated broker to work with - which we will discuss in more detail in the later sections of our guide.
Long-term investment can be well-suited for both beginners and seasoned traders - as it eliminates the need to concern yourself with the short-term price fluctuations of the coin.
For those who prefer to trade Dogecoin in the short-term using 'swing trading' or 'day trading' strategies - you will want to find an online broker who offers Dogecoin CFDs (Contracts for Differences).
Here is an overview of what CFDs are all about:
- CFDs are financial instruments that track the value of the underlying asset - in this case, Dogecoin.
- Trading with CFDs comes with the perks of low fees and leverage.
- CFDs allow you to speculate on both the rising and falling prices of Dogecoin - by going long or short on the digital asset.
Before we continue, it is important to note that CFD instruments are prohibited in the US - because of the added risk involved. In the UK, you will have no trouble accessing CFDs on conventional assets, but cryptocurrency CFDs are not legal anymore.
However, if you want to access leveraged Dogecoin markets from a country where they are illegal, you can do so through a third-party cryptocurrency exchange. However, there is a strong likelihood that these are unregulated spaces.
In addition, you will not have the convenience of funding your trading account using fiat currencies such as USD or euros. As such, you will be trading DOGE/USDT instead of DOGE/USD.
For those who are unaware - USDT is a digital currency named Tether, with its value equivalent to that of one US dollar.
How to Trade Dogecoin Online - Setting up a Trade
When learning how to trade Dogecoin, it is essential that you are familiar with the different types of trading orders. In simple terms, these orders are utilized to convey to your broker what position you are taking on the asset.
Here we have a list of the most commonly used orders when trading Dogecoin.
Buy or Sell Order
Regardless of which asset you are trading, it is mandatory that you use a buy order or a sell order.
- If you expect the price of Dogecoin to rise - you will create a buy order.
- If you expect the price of Dogecoin to fall - you will create a sell order.
Every Dogecoin trade you place will need both buy and sell orders.
For instance, if you open a Dogecoin trade using a buy order - you will exit it using a sell order. On the contrary, if you open your position with a sell order - you will need a buy order to exit it.
Buy and sell orders are only the most basic of trading orders. To be a successful trader, you also need to have an entry strategy in place.
When placing a trade on Dogecoin, you will have to specify to your broker how you want to enter the market. You have the option to choose between a market order and a limit order.
Let us give you an explanation of each:
1. Market order:
A market order will indicate to your broker that they should execute at the next best price.
For instance, let's say that Dogecoin is currently priced at $0.050. You want to secure this price immediately - so you place a market order. Your broker carries out the trade instantly.
However, you might see a minuscule difference in the price the order is actually executed at - due to the price fluctuation.
2. Limit Order:
These orders are used when you want to enter the market at a certain price. Let's say that Dogecoin is valued at $0.050.
You want to wait until Dogecoin rises to $0.055. So you create a $0.055 limit order with your broker. The order remains pending until the price is realized or you cancel the order.
As you can see, limit orders allow you to maintain more control over your positions - and is preferred by traders of all levels.
Along with entry strategies, you should also consider how you are planning to exit the trade. This is where you utilize 'take-profit' and 'stop-loss' orders.
- A take-profit order allows you to close your trades at a specific profit level. For instance. If you have a profit target of 3% on your Dogecoin trade - you will set a take-profit order at 3% above or below your entry price. When the price of Dogecoin meets your predetermined price level, your broker will automatically close the trade.
- Stop-loss orders are utilized to limit your losses on trades. Let's say you do not want to risk losing more than 1% on your Dogecoin trade. You will place a stop-loss order at 1% above or below your entry price.
Once the price of Dogecoin hits your specific stop-loss price level, your trade will automatically be closed.
Allow us to give you another example to demonstrate this concept:
- Let's suppose that you want to enter a DOGE/USD trade at an entry price of $0.05500.
- You believe that the price of Dogecoin will rise soon - so you place a buy order.
- If your Dogecoin position makes a profit of 2% - you want to close the trade.
- So you place a take-profit order at $0.05610.
- At the same time, you want to stop your losses at 1%.
- Hence, you create a stop-loss order at $0.05445.
This trade can go two ways:
- Should the value of DOGE/USD rise to $0.05610, your broker will execute the take-profit order. Your profit will be 2%, and your trade will be closed.
- Should the price of DOGE/USD fall to $0.05445 - your broker will execute the stop-loss order. Your loss will be limited to 1%, and the trade will be closed.
As you can see, you can place the take-profit and stop-loss orders on either side of your entry price. As such, irrespective of the direction the market moves, your broker will automatically close the trade at the prices predetermined by you.
How to Make Money Trading Dogecoin
Using trading orders can allow you to automate the trading process to an extent. However, these strategies alone are not adequate to ensure that Dogecoin trades will be profitable.
In this section, we will look into the other considerations that play a crucial role in the profit potential of this popular crypto-asset.
How can you make money trading Dogecoin?
Once you are thorough with the trading fundamentals of Dogecoin, you will need to know how much you want to stake on the digital coin.
In the trading industry, the stake is the amount you are willing to risk on a tradable asset. The more your stake - the higher your returns, but so are the losses.
Let us give you an example.
- For instance, if you stake $500 on Dogecoin and make a profit of 5% - you gain an amount of $25.
- In case you increase your stake to $1,000 - your profits from the same trade will amount to $50.
However, staking is not as simple and straightforward - especially when you can get emotionally carried away with your trading decisions.
Therefore, it is common for traders to use a bankroll management strategy to mitigate the risks.
Simply stated, you consider how much you can afford to lose on each Dogecoin trade. Many traders choose to stake a maximum of only 2% of their trading funds at a time.
- For instance, if you have a balance of $5,000 in your account - you will not stake more than $100 on a single Dogecoin trade.
- If you have $10,000 - the maximum amount you stake will be $2,000, and so on.
Not to worry, there are plenty of brokers out there who allow you to trade Dogecoin for smaller stakes.
2. Dogecoin Trading Leverage
Before explaining how leverage works, we should once again mention that CFDs are not permitted for US residents.
If trading Dogecoin CFDs is legal in your country, you can boost your gains by applying leverage. Note that if you speculate incorrectly on the future value of DOGE, leveraging can also amplify your losses.
Here is an example of how leverage works:
- Let's say you want to place a buy order worth $1,000 on DOGE/USD.
- You apply leverage of 1:5
- In a few hours, the value of DOGE increases by 5%.
- Without leverage - your profit on this trade will be $50
- With leverage of 1:5, your earnings will now be magnified to $250.
As is evident, leverage can boost your profits on your Dogecoin trades significantly.
For this reason, you will come across online brokers who offer leverages as high as 1:100 - sometimes more.
But take note that such platforms are most likely to be unregulated. If you trade through such dangerous spaces, you will be entrusting your capital with a broker who is not committed to the safety of your funds.
Fees to Trade Dogecoin Online
Whether you choose to trade Dogecoin in the long-term or short-term, you will need to pay fees of some description. The specific commissions and other rates chargeable will vary from one online broker to another.
Before you commit to an online broker, you should be aware of the potential fees involved in the trading process.
Here is a list of the main Dogecoin fees you are likely to encounter on trading platforms.
Dogecoin Trading Commission
Most brokers charge you a trading commission every time you place a buy or sell order with them. This is usually denoted in percentage terms against the size of your stake.
- For instance, a number of cryptocurrency exchanges charge 1.49% to trade Dogecoin.
- This means that if you place a $1,000 stake on Dogecoin, you will have to pay a commission of $14.90.
- Then, when you close the trade, the broker would charge you 1.49% again.
As you can see, you will have to pay the commission once when you enter the market and then again when you exit it.
That said, you will also come across online brokers who allow you to trade Dogecoin on zero commissions. In this case, you will only have to consider the spreads - which we will discuss next.
The spread is often regarded as an indirect fee charged by the online brokerage platform. It is the gap between the bid price and the ask price of the digital asset.
If there is a wider gap between the two prices, you will pay more in terms of the spread to your crypto-broker. Therefore, you want to look for tighter spreads so that you can keep more of your potential profits for yourself.
To provide you with an example - if your broker charges you 1.9% via the spread, you are starting the trade at a loss of 1.9%.
Meaning, you will have to make 1.9% in profits just to break even on the trade. Anything over this 1.9% will only be counted as a profit.
Other Dogecoin Trading Fees
Along with the aforementioned charges, you are also likely to come across a few other fee types when trading Dogecoin online.
- Deposits / Withdrawals: On some platforms, you will also have to pay transaction fees to process your deposits and withdrawals. For instance, at Binance, there is a 2% fee charged for every credit/debit card payment. While at Coinbase, the deposit fees are even higher at 3.99%.
- Inactivity Fee: This is another type of fee common at crypto brokers. The fee is usually charged if you do not meet the minimum trading activity on your account - often for a duration of 12 months. The fee will be directly taken from your balance every month until you withdraw the funds or begin trading again.
- Overnight Fee: If you are able to access CFDs where you live legally, you will also be liable to pay an overnight funding fee. The fee is charged for every position that is left open overnight. Some platforms also charge you a higher fee on weekends.
All things considered, we should stress that it is paramount that you check what fees and commissions you are needed to pay to your online Dogecoin broker before signing up on the platform.
How to Trade Dogecoin 2021 - Step-by-Step Walkthrough
If you have read our How to Trade Dogecoin Guide from start to finish, you now have a thorough understanding on how things work.
If you feel ready to start trading Dogecoin, all that is left is to set up your trading account. Follow the step-by-step walkthrough we have described below, and you will be able to trade Dogecoin in minutes.
Step 1: Choose a Dogecoin Trading Site
The first thing on your checklist is to find a suitable trading broker. There are dozens of online platforms competing for your attention, and as such, the process can indeed be overwhelming.
Here are some of the factors that you need to consider when looking for a broker that fits your needs:
- Regulation: Does the Dogecoin broker hold a license from regulatory bodies such as the FCA, CySEC, or ASIC?
- Fees: What will you be liable to pay in terms of commissions, spreads, and other trading fees on the brokerage site?
- Payments: Which payment methods does the site support?
- Minimum Deposits: Is there a minimum deposit and stake required to start trading Dogecoin?
- Dogecoin Pairs: Which Dogecoin trading pairs are offered?
- Trading Platform: Is the trading platform easy to use?
- Mobile App: Is there a mobile application available?
As is evident, there are many aspects that you need to keep an eye out for when choosing your Dogecoin broker. By going through our check-list, you will be able to weed out the platforms that are not worth your time.
Step 2: Open a Dogecoin Trading Account
Once you have identified the broker you want to trade Dogecoin with, you can proceed to open an account with them. All you need to do is provide your basic information - such as your full name, address, email, and contact information.
On regulated brokerage platforms, you will also need to verify your identity. The online broker will need to know who you are as per KYC norms. You can complete this step by providing a photo ID such as your passport.
Step 3: Deposit Funds
One of the advantages of choosing a regulated Dogecoin broker is that you can fund your trading account with fiat currency.
The best online crypto brokers will offer you various payment methods to choose from. These include bank transfers, credit/debit cards, and e-wallets such as PayPal.
Step 4: Choose Dogecoin Trading Market
With your trading account funded, you can choose the specific market you wish to trade.
As we discussed earlier, you can trade Dogecoin against a fiat currency or other cryptocurrencies.
If you already have a specific market in mind, you can simply search for it on the brokerage site.
Step 5: Place Dogecoin Trade
When you have found your chosen market, you need to set up your trading orders. If you need to review again, feel free to check our previous section further up in our How to Trade Dogecoin Guide.
When ready, you can place your first Dogecoin trade. Based on your prediction, you can place a buy or sell order.
How to Trade Dogecoin Guide - The Verdict
To sum up, learning how to trade Dogecoin can take time. However, given the circumstances, it is a trading domain that is well worth considering.
Dogecoin continues to gain more interest from cryptocurrency enthusiasts around the world - and it will be exciting to see where the digital coin is headed next.
Having said that, it is crucial that you stick with a regulated broker when trading Dogecoin online.
Make sure that you crosscheck the different parameters we have mentioned in our guide, and you will be able to find a top-rated broker that can help you achieve your trading goals.
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How safe is it to trade Dogecoin online?
Trading Dogecoin online is safe - given that you use a regulated broker to execute your trades.
Where can I start trading Dogecoin?
Trading Dogecoin online is pretty easy. All you need to do is to find a respected online broker and open an account with them.
Can you get rich by trading Dogecoin?
If you are able to correctly speculate on the short-term price movements of Dogecoin - you will make a profit. On the contrary, if you speculate incorrectly - you will make a loss. As such, it is best to adopt a bankroll management strategy to take calculated risks.
Can you trade Dogecoin legally in the US?
Yes, you can trade Dogecoin in the US. However, you cannot access leveraged crypto CFDs.
Is it possible to trade Dogecoin with leverage?
Yes, you can. That said, depending on where you live, there might be restrictions on trading Dogecoin with leverage. For instance, in the US and the UK, leveraged cryptocurrencies is not permitted - so you will not be able to obtain leverage through a regulated brokerage.