By
Steve Muchoki
April 25th, 2024
As the number of Dogecoins available in the market is unlimited, it may not be a good approach to buy and hold for the long term.
The keen eye of many billionaire investors over the cryptocurrency market causes great fluctuation in the cryptos. Dogecoin is one of the digital coins which went skyrocketing when Elon Musk, the owner of multiple companies and a billionaire, chose the instrument as his go-to project. Even before his attention, the instrument was already jumping with the hype on the Reddit forum.
Dogecoin was introduced first in 2013 by Jackson Palmer and Billy Markus. It is also known as the meme cryptocurrency. There is no cap on the number of Dogecoins that can be released in the market.
How Can You Trade Dogecoin?
It is possible to trade Dogecoin using cryptocurrency exchanges and brokers. Within the following steps, traders can buy or short the digital asset:
- Find a broker. A good cryptocurrency exchange provides the best possible opportunities for trading. Look out for brokers that are regulated by noted authorities.
- Signup. Make your trading account by signing up on the website. Provide your valid email address and verification documents if needed.
- Start trading. Deposit on the account and start trading on Dogecoin.
Strategies to Trade Dogecoin
The process of trading cryptocurrencies is much similar to forex trading. Traders have to be well aware of the crucial factors that move the markets. Let us discuss some of the vital Dogecoin strategies that can be fruitful for us:
Keeping an eye on the Fundamentals
Economic events can rive the value of cryptocurrencies by a significant margin. As mentioned before, the events on Reddit and the tweets from Billionaire in support of Dogecoin drove the cryptocurrency to new highs in the year 2021.
Since Bitcoin is the parent currency of all the cryptos, it is also essential to follow any news related to it.
Technicals
Technical traders can benefit from using price action patterns and indicators for trading Dogecoin. Different support and resistance zones alongside Fibonacci intervals and trend lines can be plotted on the designated charts for future analysis.
Price action analysis on the hourly chart at Dogecoin shows potential resistance at 30.2. The trader plots a red line and waits for the market to retrace before taking his sell for a reasonable risk: reward.
As the number of Dogecoins available in the market is unlimited, it may not be a good approach to buy and hold for the long term. The digital asset may oversaturate at some point which can lead to extreme selling and devaluation. Day trading and scalping is the best option for many.
Grid and martingale strategies are also common amongst traders. This involves buying the asset against its current trend and increasing the lot size progressively. As the market goes for a turn, traders can then take profit.
A Few Important Things to Know
Dogecoin trading has a few characteristics that investors should know:
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- Payments Similar to other cryptocurrencies, Dogecoin can also be used to make payments online. Investors have to be wary of the costs, which can differ from one exchange to another.
- Capital requirement. The capital requirements for Dogecoin are reasonable. However, to make good profits with risk management in check, traders may need a big balance.
- Volatility and Liquidity. The price movements and the volume of the cryptocurrency can jump up and down as the bulls and bears fight for their share. A mentioned before, the meme-based currency can follow the general trend on Bitcoin in most cases.
- Basics. Even if the coin looks impressive to certain traders, it is essential not to ignore the need for a proper mindset and risk management. It is pretty easy to lose capital if a trader uses more margin.