Dogecoin (DOGE) is a digital asset that makes it easy to send and receive funds. The digital currency was launched as a joke in 2013, poking fun at the frenzy surrounding cryptocurrencies at the time. Thus, there are no unique features or characteristics that set this coin apart from others.
However, Dogecoin has since improved its image to become a friendlier Bitcoin alternative. Thanks to social media mentions of famous supporters like Elon Musk, the coin’s value has skyrocketed in recent months.
Today, this is considered a stepping stone into the cryptocurrency world.
As with other cryptocurrencies, Dogecoin’s value fluctuates throughout the day – sometimes even for a second. When trading Dogecoin, your goal is to speculate on the price of DOGE coins in the future.
If Dogecoin is in high demand, the price of digital currency will rise. If more and more traders try to cash out their Dogecoin assets, the coin’s price will drop. Being able to predict these price swings is how you profit from trading Dogecoin online.
Here’s a practical example to clear the fog:
- Let’s say Dogecoin is priced at $ 0.0560.
- On cryptocurrency platforms, this is referred to as DOGE / USD.
- Assuming Dogecoin is undervalued, you place a buy order for $ 1,000.
- A couple of months pass and the digital asset is valued at $ 0.0700.
- It means a 25% increase in value.
- You place a sell order to exit the trade at a profit.
In this example, we saw the Dogecoin price rise from $ 0.0560 to $ 0.0700 in two months. This gives you a $ 250 profit on your $ 1000 bet.
Simply put, if you speculate correctly, Dogecoin trading has high-profit potential. On the other hand, if your assumptions are wrong, then this is a completely different story, leading to losses in the trade.
Hence, before you start trading Dogecoin online, you must be knowledgeable about the intricacies of this particular market.
Dogecoin trading price dynamics
To trade Dogecoin successfully, you need to have a solid understanding of what affects the price of a digital asset. You can find Dogecoin on most cryptocurrency platforms these days. If more traders open long positions on the asset, this will be reflected in the overall increase in the price of the coin.
On the contrary, if the general opinion about digital currency is to go short, then the value of the coin will also fall. As you may have noticed, the price of Dogecoin may differ slightly on different cryptocurrency platforms. One broker might offer you $ 0.0594, while another might have a coin priced at $ 0.0596.
However, this difference is not a cause for concern and will not affect your ability to place profitable trades in any way.
Dogecoin trading couples
As we said in the introduction, Dogecoin trading is done using crypto pairs. You can trade a digital asset for both fiat currencies and other cryptocurrencies.
Let’s start with “crypto-fiat” pairs – a term that you will come across quite often in the Dogecoin trading space.
- For example, when you see a DOGE / USD pair, it means that Dogecoin is trading against the US dollar.
- In this case, DOGE is a cryptocurrency, and the US dollar is fiat.
The US dollar, being the reference fiat currency, is the most widely used when trading cryptocurrencies.
However, 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 offers the benefits of high liquidity and tight spreads. Moreover, it is easier for traders to determine profits and losses, and also to speculate on the exchange rate.
For this reason, crypto-fiat currencies are considered a more suitable option for novice traders. Another option is to exchange Dogecoin for other cryptocurrencies such as Ethereum or Bitcoin. However, this requires a good knowledge of both the competing coins and their respective markets. As you can imagine, this can be difficult for novice traders.
To summarize – whether you decide to trade Dogecoin for fiat or other cryptocurrencies, you should arm yourself with the specifics of the assets in question.
Long-term or short-term trade
Before you start speculating on Dogecoin, you should first think about which financial instrument is most suitable for your trading purposes. Here are two options – invest in a cryptocurrency in the long term, or trade an asset in the short term.
For example, if you are confident that Dogecoin has a promising future ahead, you might consider investing in a digital coin in the long run. In this case, you will buy coins in the traditional sense and store them in a crypto wallet.
This way, you can hold Dogecoin for months or years – until you decide it’s time to cash out and make a profit. In the world of cryptocurrencies, this strategy is commonly known as HODLing.
On the other hand, short-term strategies require a deep understanding of technical analysis to support your decision-making process. In particular, for novice traders, this will not be an easy task.
It takes a long time to learn how to read charts and other technical indicators. Therefore, if you are a beginner, then the buy-and-hold approach would be easier.
This way, you don’t need to worry about short-term volatility in the Dogecoin market. However, if you prefer to make small profits regularly, a short-term strategy is better for you. In this case, it is best to use liquid pairs such as DOGE / USD or DOGE / BTC.
