How To Invest & Trade in Dogecoin (DOGE)
Why Should You Invest in Dogecoin?
You might be wondering, “Is Dogecoin worth investing in? Should you invest in Dogecoin?” From a traditional investment point of view, Dogecoin might not be the best investment for you, but that might be why some consider investing in cryptocurrency.
Dogecoin as a concept is fun, but it is a risky investment. The coin does not derive value from other assets like stablecoins. Also, it has no added value to any known financial system such as Ethereum. Dogecoin depends on its entertainment value and community as its biggest asset.
Therefore, since the cryptocurrency doesn’t have any intrinsic value, its worth is highly dependent on its popularity. This results in short-term gains, but the investment is not worth it in the long haul.
Dogecoin: Investing Vs. Trading
There are two options for getting exposure to Dogecoin. You could outright own the coin/ invest with the hopes that the coin’s price will appreciate. You could also speculate on its price/ trade it and make a loss or profit depending on how the market is doing.
One of the reasons you may decide to invest in Dogecoin is that its real-world usage may increase. There is a possibility of a broad acceptance of the coin in coming years, and thus it might be worth keeping. The coin is also shifting from PoW to PoS. This will allow anyone owning the coin to validate transactions.
You should also be aware of tax implications, Dogecoin transaction fee, and Dogecoin transfer fee while trading. Making a good market timing can bring good yields, especially if you buy at lows and sell at highs. Therefore, holding or selling the coin is a personal decision based on your situation at the moment.
Reasons to Trade Dogecoin
If you are among the lucky individuals who made something from cryptocurrency, it might be good to sell. Traditionally, stocks have been known to help traders build wealth, but we have witnessed the same with the coming of cryptocurrencies.
Dogecoin has been a favorite fan cryptocurrency that we have experienced its value jumping more than BTC or ETH at some point. It might be time to part ways with the coin and engage in Dogecoin trading. Here are some of the reasons:
- The coin has limited utility in the real world.
- Unlike BTC, the most valuable crypto, Dogecoin does not have a competitive edge.
- The coin depends on social media hype, and this is not sustainable.
How to Analyze Dogecoin’s Price Movement
Knowing the market patterns and trends is crucial for successful trading. It would help if you analyzed the movements of the market’s price you are speculating.
Fundamental analysis and technical analysis are the primary tools for Dogecoin price prediction. Technical analysis is the study of the Dogecoin price chart over time. It enables one to determine patterns and trends which will be of assistance in predicting future ones.
On the other hand, the fundamental analysis applies a more holistic approach. It understands the worth of an asset and establishes whether the investment is overpriced or underpriced at the moment, and trades appropriately.
Some of the crucial sources for fundamental analysis are macroeconomic factors, Dogecoin events, changes in Dogecoin leadership, and financial statements. Generally, we are talking about factors that could affect the short-term and long-term prices of Dogecoin. For instance, there were changes in legislation in China regarding cryptocurrency and mining. This affected the price of Dogecoin.
Dogecoin Trading Strategies
Dogecoin trading strategies are not limited. There are many approaches applicable to cryptocurrencies, Dogecoin CFD trading in particular. It would be helpful if you noted none of the trading approaches is a “one size fits all.” Therefore, you should analyze each Dogecoin trading strategy carefully and see if it fits with your trading style. Below are some of the Dogecoin trading strategies.
The Single Simple Moving Average Cross
The SMA trading strategy is a common approach among multiple asset classes. Moving asset indicators can simplify the difficult task of learning the patterns and trends of a new asset, for instance, Dogecoin.
To use the strategy, you need to enter a line of a single moving average onto the trading chart of Dogecoin, then choose your period to plot. You will get an SMA line over the period and the current price of Dogecoin.
When the price crosses the moving average price from below, this is referred to as the bullish cross or golden cross. It is usually an indication to go long or buy. On the other hand, price crossing the SMA from above is referred to as a bearish cross or death cross, and usually, signals go short or sell.
The RSI Divergence Strategy
Since its onset, Dogecoin has had ups and downturns, remaining flat for a period before spiking and then falling. As a result, an RSI divergence strategy can be beneficial.
The RSI divergence indicator establishes whether an asset is oversold or overbought. The indicator provides a line from 0 to 100 to show this. Typically, any price that tips the line on the scale above 70 is taken to be at the end of a bull run and has a high chance of falling again. On the other hand, a reading of 30 and below indicates an asset is oversold, and there are high chances of the price rallying soon.
Pound Cost Averaging
Pound cost averaging investment is a simple trading strategy. It involves splitting up your ‘pounds’ over a duration.
The strategy applies to any currency. As a trader, all you need is to establish the total size of the position you want to speculate with, and rather than putting everything in one trade, you separate it over set time intervals or set market conditions.
Pound cost averaging aims to deliver an overall profit average made from several trades. The approach is designed to give more gains than losses over several transactions. It is therefore suited for long-term trading.
How to Trade in Dogecoin
Dogecoin is a meme cryptocurrency born from the Shiba Inu dog meme. You can trade Dogecoin against other cryptocurrencies or fiat currencies such as the US dollar. You can buy and gain ownership of Dogecoin or acquire price movements’ exposure through CFDs and the future. Below are some of the steps on how to trade in Dogecoin.
Choose a Trusted Broker
Both a cryptocurrency broker and a cryptocurrency exchange can help you trade Dogecoin. The two are, however, slightly different.
While an exchange is a trading platform, a broker acts as an interface that interacts with the exchanges on your behalf. You should ensure you are acquainted with the rules of moving your assets once you choose a broker.
Open a Trading Account
You will need to open an account with a Dogecoin trading platform. You can either choose eToro, Coinbase, or Robinhood.
You will need to provide your details to open the account. After you fill in the required information, you will verify the account, and you are good to go.
You need to have funds in your account before you can buy Doge. You can add money to the cryptocurrency account by linking it to your bank account. You can also wire transfer or pay with a credit or debit card. Depending on the broker or exchange, it may take a few days before you can buy DOGE.
Choose Dogecoin (DOGE) Trading Market
Once you deposit funds in your account, you will need to go to the Dogecoin market. If you are a beginner, you can start by choosing a few coins before and slowly progress as you continue to understand how DOGE works. Also, buying DOGE on any platform is straightforward.
Place Dogecoin Trade
After choosing your DOGE trading market, it is time to trade. Many approaches can be utilized when it comes to cryptocurrency trading. You will need sufficient research and knowledge to maneuver. Also, beware of the risks involved and the laws in your region to make the best decisions.
Risks of Investing in Dogecoin
There are many risks of Dogecoin that will require you to tread with caution before investing in cryptocurrency. First, like any other cryptocurrency, the volatility of Dogecoin is an issue. It will be difficult for the cryptocurrency to regain its highs in 2021.
Many investors claim the coin is undervalued, and some sight that the price may even drop further. Therefore, you may have to watch out before investing in DOGE.
There are also market risks that you face by investing in Dogecoin. The risks are systematic and unsystematic. Systematic risks affect the whole crypto market, while unsystematic risks affect a single cryptocurrency, in our case Dogecoin, which could have to do with a change in a company’s fundamentals.
There are also tax concerns depending on your jurisdiction. Therefore, seek tax advice before you indulge in trading for compliance. Another risk you may face while trading is cybercrime. You should beware of these dangers and try to safeguard yourself.
How to Trade Dogecoin Guide – The Verdict
It is well known that Dogecoin started as a joke. But it grew, and many investors took it seriously. However, cryptocurrency is a risky investment to make. It is advisable to allocate only 3%-10% of your portfolio to cryptocurrency.
To invest in Dogecoin, the amount you settle on should be proportional to your risk tolerance and financial position. For instance, an individual behind on retirement savings should shun or invest very little in Dogecoin. On the other hand, if you are financially stable and have good protection and an emergency fund, you can invest higher amounts in Dogecoin.
Also, make sure you are up to date with crypto news and do a lot of research. That way, you will mitigate the risk levels.