What is Dogecoin trading and is it safe?
Dogecoin was dubbed by innovative entrepreneur Elon Musk as “the people’s crypto”. Software engineers Jackson Palmer and Billy Markus combined to launch Dogecoin in 2013.
It was labelled a “fun and friendly internet currency” that tried not to take itself too seriously, in light of the surge of activity surrounding Bitcoin.
Dogecoin was founded upon the source code of the now-defunct Luckycoin altcoin, which was also a hard fork of Litecoin. Unlike Bitcoin, Dogecoin’s source code states there is no limit on the amount of DOGE coins that can be mined into circulation. Dogecoin also benefits from swift transaction approvals on its blockchain and significantly cheaper transaction fees than Bitcoin.
Is crypto trading safe when it comes to Dogecoin? Yes and no. It is relatively safe in terms of the cost of Dogecoin. With over 130 billion DOGE in circulation, this helps to keep the price of Dogecoin at comparatively low levels compared to Bitcoin.
Consequently, many people look to use Dogecoin to pay for low-value goods and services, including tipping on social media platforms.
On the flip side, Dogecoin carries tremendous volatility, with its price capable of impactful fluctuations overnight. This can cause DOGE traders to lose a significant percentage of their investments within a matter of hours.
For example, the price of Dogecoin was $0.72 on 8 May 2021, but fell more than 50% to just $0.35 in the space of a fortnight. Of course, where there is volatility in the markets there are trading opportunities, but it’s about finding the right times to enter and exit the market.
Unlike Bitcoin and other major altcoins like Ethereum and Litecoin, Dogecoin is not as widely available with crypto exchanges. However, it is possible to buy and sell DOGE using contracts for difference (CFD) brokers that allow you to speculate on Dogecoin’s price without having to acquire and own the underlying asset.
Dogecoin is by no means legalised or legal tender in the UK at present, but it’s certainly making waves as a casual crypto asset for tech-savvy investors.
How to trade Dogecoin online
Choose an exchange platform & open an account
Aside from CFD brokers that support altcoins like Dogecoin, you can also embark on Dogecoin trading UK by using one of a handful of cryptocurrency exchange platforms. This includes BC Bitcoin, Cex.io, and Coinbase. Binance was another popular crypto exchange to buy and sell Dogecoin in the UK until it was prohibited by the UK Financial Conduct Authority (FCA) to undertake “any regulated activity” in June 2021.
If you would prefer to trade the price of Dogecoin without physically owning and storing DOGE in a cryptocurrency wallet, you can always trade Dogecoin with any of our recommended CFD brokers that support altcoins like DOGE. Check out our in-depth reviews of all the latest regulated and reputable CFD brokers that can help you get into the world of crypto and forex trading for the first time.
Buy some Dogecoin
If you would like to buy Dogecoin outright, you will need two things – an account with a reputable cryptocurrency exchange that supports DOGE, and a cryptocurrency wallet that also supports DOGE. Dogecoin can be bought and sold in real-time with exchanges such as Coinbase, eToro, Gemini and Webull.
First and foremost, you must verify your account with your chosen cryptocurrency exchange. This usually requires an upload of government ID to approve your name and address. You can then make a deposit into your chosen crypto exchange using fiat currency like GBP or USD.
Look out for the DOGE/GBP trading pair with your chosen exchange. This will display the real-time market value of one Dogecoin in British pounds. This will fluctuate in real-time, based on a string of technical and fundamental factors.
When you buy Dogecoin with a crypto exchange, you will need a hot or cold cryptocurrency wallet to store your DOGE. Some of the leading exchanges will offer their own ‘hot’ wallets which are managed in-house by the exchange.
If you’d rather be in control of the destiny of your own crypto wallet, we’d recommend a hardware wallet like a Ledger Nano S or Trezor wallet that allows you to store your wallet’s private key offline, away from the prying eyes of cyber criminals.
An alternative way to invest in Dogecoin is to trade DOGE using a CFD brokerage. If you’ve never traded using CFDs before, think of them like a written contract between the broker and you, the investor. When opening a CFD, both parties commit to paying the other the difference in the value of an asset based on its price when opening and closing the trade.
The reason many people choose to trade using CFDs on cryptocurrencies and forex is the ability to trade their values in both directions. If you anticipate the price rising, you can open a long (buy) trade. If you believe the price of a crypto asset will fall, you can open a short (sell) trade. Therefore, it doesn’t matter whether you have a positive or negative view of a cryptocurrency, you can still place a CFD trade that can work in your favour.
If you are wondering how to profit from Dogecoin trading using CFDs, let’s make it clear how you can earn money by opening and closing positions with your chosen Dogecoin trading platform.
Let’s say you believe the price of Dogecoin will rise, resulting in you opening a long (buy) position on DOGE. So long as the price of DOGE is higher than your initial opening position when you close it, you will make a profit. Similarly, if you feel the price of Dogecoin is due to fall, you may open a short (sell) position on DOGE. Providing the price of DOGE is lower than your initial opening position when you close it, you will turn a profit.
Close your position to take a profit or cut a loss
When you trade Dogecoin with any of our recommended CFD brokers, it’s easy to close open positions on DOGE, even if you are having to accept a loss. Their intuitive trading software makes it easy to quickly execute closing trades to take a profit or loss. You can also set stop loss orders in the market, defining an acceptable percentage loss that automatically closes your Dogecoin trade if it reaches this value.
It’s important to be prepared to take a percentage profit or loss. By executing take profit orders, you are setting a benchmark for an average return on investment from each trade you make. In addition, by implementing a stop loss, you are preserving your wider trading bank by only losing a small percentage of your overall stake if a trade goes against you.
Tips to trade Dogecoin
Looking for a helping hand with your Dogecoin online trading? Here are a few pointers to get you started with mastering your crypto trading entries.
Learn what moves Dogecoin’s price
Dogecoin is one of the more volatile altcoins because of the media attention it attracts. The meme-inspired altcoin first experienced a significant rise in its value back in 2018. This was based on a spate of media reports stating that Dogecoin’s market cap had breached the $2bn mark, suggesting that this was becoming something of a serious cryptocurrency.
Perhaps the biggest surge in the value of Dogecoin occurred in the summer of 2020 when futuristic entrepreneur Elon Musk publicly endorsed it, leading to a 14% rise in the value of DOGE. As recently as July 2021, Musk has also extolled the virtues of the Dogecoin project and its “minimized transaction costs” compared with Bitcoin and Ethereum, whose transaction costs are both “high” and “slow”.
Earlier in 2021, Dogecoin attracted further attention when retail traders sought to invest heavily as part of the Wallstreetbets GameStop event. It, therefore, pays to keep a close eye out for mentions of Dogecoin in the media, particularly from the likes of Elon Musk who are such vocal backers of the project.
Pick a Dogecoin trading style and strategy
There are two types of Dogecoin trading styles you could look to adopt. The first is a technical trading style, founded upon analysis of its price charts. Technical crypto trading is usually reserved for more experienced crypto investors that can quickly pinpoint areas of support and resistance in the markets and trade within a price range.
The second Dogecoin trading style is a fundamental approach. As just discussed, news releases on Dogecoin tend to have a profound effect on the overall view of DOGE. Fundamental crypto traders will absorb news stories and press releases to gauge the overall sentiment towards an asset before opening a long or short position.
When it comes to technical trading strategies for Dogecoin, traders will often use moving averages as an indicator for a shift in price action. Although these averages are based on historical data, they help to build a stable, long-term picture of the market. From a technical perspective, stochastic oscillators can also help to demonstrate when a crypto asset is overbought or oversold, hinting at potential reversals in price over the short-to-medium-term.
The key to a solid fundamental crypto trading strategy is to get access to the news fast. If you are too slow, the chances are you could miss the initial price move based on the news and eventually open a position that could quickly reverse. Speed is most certainly of the essence here.
Decide whether to go long or short
When you trade CFDs, you have the flexibility to go long and profit when the price increases or go short and profit when the price decreases. Using technical or fundamental analysis of the Dogecoin market, you should be able to ascertain the short-term momentum and execute quick scalps that secure small but frequent profits that can enhance your trading bank. Alternatively, you may prefer to use technical analysis to plot a longer-term entry, opening a single position on DOGE with a long-term view on its rise or fall.
Set your stops and limits
The beauty of trading Dogecoin using a state-of-the-art CFD brokerage is that intuitive trading platforms make it easy to control your positions in the market. Before you even open a position, you can define a stop loss order that cuts your position once it hits a predefined loss percentage.
Alternatively, you can set a take profit order, which automates a closing order when your position reaches a predefined profit percentage. This takes the emotion out of your Dogecoin online trading and allows you to stick to a trading plan.
Retail crypto traders have scrambled to trade the price of Dogecoin in recent years, but some of them have had their fingers burnt for failing to do their research first. We’ve rounded up the key risks of trading alternative cryptocurrencies like Dogecoin.
- Volatility could make it hard to liquidate profitable positions
There is likely to be a price where you would be willing to trade out of your Dogecoin position for a profit. However, there will be tens of thousands more people like you with set profit targets. If they are the same as you, you’ll find the price of Dogecoin begins to plummet as the number of sellers outweighs the buyers. The volatility of cryptocurrencies can make it difficult to find the liquidity you need to trade out of profitable scenarios. Automating your take profit and stop loss orders can help in this regard.
- The Dogecoin community is vulnerable to potential hacks
It’s important to note that the Dogecoin infrastructure has a part-time team of developers overseeing it. There’s no full-time team managing it 24/7. This makes Dogecoin more susceptible to cyber-attacks than most other established altcoins.
- There is a well-known whale holding over a quarter of all DOGE
Retail investors in Dogecoin should also note the presence of a Dogecoin ‘whale’ who reportedly owns 28% of all DOGE in circulation. In addition, only 100 cryptocurrency wallets reportedly hold 70% of all Dogecoin. This means this whale and the small cluster of major DOGE owners can influence the price of Dogecoin, particularly when they look to sell off parts of their holdings which can cause the price of DOGE to crash in the process, causing market panic.
Dogecoin trading brings with it risks and advantages in equal measure. This altcoin is increasingly in the media glare, which makes it easy to keep on top of updates to the Dogecoin project. It’s also worth noting that Dogecoin is an inflationary cryptocurrency, unlike Bitcoin and Litecoin, which cannot be labelled such due to their cap on BTC and LTC in circulation. The benefits of Dogecoin being an inflationary asset means there should always be a constant supply to liquidate your positions.