How to buy and trade Dogecoin (DOGE) in Australia

What is Dogecoin (DOGE)?

Dogecoin (DOGE) is ‘an open source peer-to-peer currency’. In other words, it’s a cryptocurrency enabled by blockchain technology. It’s also one of the world’s most prominent ‘altcoin’ currencies (an alternative to the more established cryptos like Bitcoin and Ether). Dogecoin is primarily famous for (and valuable because of) its loyal following and hype on social media and for carving out a name for itself in pop culture.

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A brief history of Dogecoin

Dogecoin was officially launched in December 2013 in the USA by Jackson Palmer and Billy Markus, who wanted to harness the peer-to-peer capabilities of blockchain by creating a cryptocurrency centred around community.

If all that sounds very serious, Palmer and Markus have gone on record saying that they intended to start Dogecoin as a cheeky dig at crypto giant Bitcoin. As such, they chose for the face of their brand the canine mug that launched a thousand memes: the famous ‘Doge’. And so Dogecoin was born – the very first ‘meme cryptocurrency’.

Dogecoin quickly made use of social media to punt the new coin, primarily Twitter and Reddit – and later TikTok. Dogecoin has also benefitted significantly from tweets and other social media references by names such as GameStop, Snoop Dogg and Kiss’ Gene Simmons.

The crypto has displayed a canny wielding of popular culture. Some of their more prominent publicity stunts included sponsoring the Jamaican bobsled team at the 2014 Olympics in homage to the Cool Runnings movie and funding a SpaceX mission. In fact, Elon Musk has promised to literally take Dogecoin ‘to the moon’ in physical coin form.

In 2015, the Dogecoin community experienced a big shock when Palmer left the fold, pronouncing it ‘toxic’.

Still, Dogecoin’s star was on the rise. By 2017, the cryptocurrency was definitely not a joke anymore, having achieved a market value of $2 billion. And, from 2017 to 2019, the world increasingly turned to any and every cryptocurrency in what has since been dubbed the ‘crypto bubble’ period.

By 2 June 2021, Dogecoin had temporarily reached a market cap of over $50 billion – larger than that of Twitter at the time - and a market value of more than $9 billion. However, at the time of writing this article (1 December 2021) Dogecoin has yet to reach its ultimate goal of being valued at $1 per coin.

How to buy Dogecoin: investing vs trading

When it comes to getting exposure to Dogecoin, you have two options. You can either own the coin outright (i.e. invest) in the hopes that Dogecoin’s price will appreciate. Or, you can speculate on the price of Dogecoin (trade it) and make a profit or loss depending on whether you predict correctly on whatever the market’s doing.

Investing in Dogecoin

Investing in Dogecoin means buying an amount of the coin to own outright. Just like with all other investing, you’ll only be able to make a profit if the price of Dogecoin appreciates after you’ve bought it and you manage to sell it for a higher price.

This would mean a ‘buy and hold’ strategy is in order, meaning you need to be committed to a fairly long-term journey with Dogecoin.

When investing in Dogecoin, you’d do so online with a broker that offers outright purchasing of cryptos. Any Dogecoins bought would go into a crypto wallet, which digitally stores and holds your Dogecoin for you until you choose to sell. However, we don’t offer this.

Trading Dogecoin with CFDs

If you want to take a position on Dogecoin without having to own any actual cryptocurrency coins, plus have the flexibility to go long or go short depending on how the markets are performing, you’ll trade Dogecoin instead of investing in it.

Trading Dogecoin with us means you’ll be using CFDs. Short for ‘contracts for difference’, CFDs are a derivative form of trading. When trading via CFDs, you’ll speculate on the price of Dogecoin and make a profit or loss depending on whether your prediction is correct. Whatever the difference in price is between when you open your position versus when you close it will either be what you receive in profit or forfeit in loss.

Trading with CFDs can carry certain tax benefits, depending on the tax laws for that region. For example, although capital gains tax is payable on any profits you make in some countries, these can be offset against any losses when trading CFDs.¹

CFDs are also leveraged. This means you can go long if you believe Dogecoin’s price will rise, or go short if you feel its price will fall. Either way, you’ll make a profit if you’re correct. This gives more flexibility than purchasing Dogecoin, which will only make gains if the value of the cryptocurrency increases.

The way that leverage works is that you’ll put down an initial deposit (called a margin), which is a percentage of the total position value you want to trade. This deposit will enable you to open the full position’s size, essentially ‘borrowing’ the rest of that amount from your platform or provider. Whatever gains or losses you make will be based on the full position size.

So, let’s say you want to open a position worth AU$100 with CFDs on Dogecoin. The margin amount is 50%, so you pay AU$50 to open a AU$100 trade. Profits and losses will be calculated on the full AU$100 amount, not your AU$50.

This often makes trading with leverage riskier than investing outright, as you stand to lose or gain substantially more than the amount you paid to open a position. So, always ensure you’re taking steps to manage your risk.

How to sell or short Dogecoin

If you think that Dogecoin’s price might take a dive in the future, you’ll want to go short. This is the CFD equivalent of selling (versus going long or ‘buying’) and means you stand to make a profit if Dogecoin’s price drops or a loss if its price appreciates.

Here’s how to short Dogecoin with us:

1. Create a CFD trading account or open your existing account
2. Open the CFD trading platform and search for ‘Dogecoin ’ in the finder panel
3. Choose your position size in the deal ticket
4. Click ‘sell’ in the deal ticket and confirm the trade

When short selling, it’s important to manage your risk as, theoretically, your capacity for loss is unlimited. This is because there is no limit to how much an asset’s price can rise in the market, so always ensure you’re trading within your means.

How to analyse Dogecoin’s price movements

The key to any successful trading is to know the market you’re speculating on and its patterns and trends, to be able to accurately predict its movements. So, analysis of price movements is vitally important.

When getting to know Dogecoin’s price movements, two main tools are your friend: technical analysis and fundamental analysis.

Technical analysis involves the study of an asset’s price chart over time, to determine trends and patterns in the hope of predicting future ones. It usually uses various indicators, including moving averages, Bollinger bands and Fibonacci retracements.

While technical analysis looks solely at charts and indicators, fundamental analysis takes a more holistic approach. The purpose of fundamental analysis is to understand an asset’s worth in context and determine whether or not its presently overvalued or undervalued and trade accordingly.

Some key sources for fundamental analysis include financial statements, major macroeconomic news and changes in Dogecoin leadership or major Dogecoin community events. In other words, anything that could affect Dogecoin’s price short or long-term. For example, changes in China’s legislation of cryptocurrencies and crypto-mining tend to impact Dogecoin.

Dogecoin trading strategies

Although Dogecoin is a relatively new market, there are a multitude of trading strategies out there uniquely suited to cryptocurrencies and Dogecoin in particular. We will unpack some of the rising stars in trading strategies that have so far seemed successful and popular with Dogecoin traders.

However, bear in mind that no trading strategy is a ‘one size fits all’ approach. Each must be thoroughly vetted by you and analysed for its compatibility with your trading style and overall trading goals. You should always be ‘backtesting’, a process that runs a trading strategy against historical chart data to see if what your strategy indicated or predicted did in fact come to pass on the Dogecoin chart.

Here are a couple more specific Dogecoin trading strategies:

The single simple moving average cross

Moving average indicators, in particular single moving averages (SMAs) are popular across trading strategies of multiple asset classes. This is because they can simplify the often intimidating task of learning the trends and patterns of a new asset, like Dogecoin.

To follow this strategy, you’d plot or enter a single moving average line onto Dogecoin’s trading chart and choose your time period to plot – for example a 10, 20, 50, 100 or 200-period. This will give you an SMA line over that time period, as well as Dogecoin’s current price.

The beauty of the SMA strategy is that it translates into easily recognisable patterns with clear ‘buy’ or ‘sell’ messages. Most famous of all these is the simple moving average cross, which is when Dogecoin’s current price line crosses over the SMA line.

When the current price of Dogecoin crosses your moving average line from below, this is known as a ‘golden cross’ (or a bullish cross), and is usually a sign to buy or go long. When the price crosses your SMA line from above, it’s called the ‘death cross’ (or bearish cross) and is usually a sign to sell or go short.

This is a useful strategy when the Dogecoin market is particularly volatile, but it should be noted that, especially with its lack of exponential moving average (EMA) indicators, this strategy does not take into account news and other current macroeconomic events, which often affect the price of Dogecoin considerably.

The RSI divergence strategy

In its short existence as an asset, Dogecoin has been subject to numerous bouts of hype and downturns, remaining flat for some time and then suddenly spiking and falling in price. For this reason, a relative strength index (RSI) divergence strategy can also be a good idea.

The RSI is an indicator in technical analysis that is mainly used to determine when an asset (like Dogecoin) is either overbought or oversold. The RSI indicator gives a line that ranges from 0 to 100 to show this.

Generally, a price which tips the line above 70 on that scale is considered to be at the end of a bull run and likely to fall again soon. Conversely, a reading of 30 or below is thought to mean that asset is oversold and its price is likely to rally again soon.

Now, students of Dogecoin’s price movements may want to point out that there have been several times when traders thought Dogecoin was overbought and was going to downtrend – and then didn’t. For this, Dogecoin traders have turned to one of the most well-known strategies involving the RSI indicator – the RSI divergence strategy.

This strategy mainly looks at the divergence (or difference) between an asset’s price line and its RSI indicator reading between 0 and 100. Whenever there is a discrepancy between the two, this acts as a kind of early warning momentum indication that market sentiment is starting to shift. So, this can be a more reliable method of predicting when Dogecoin is overbought or oversold than just looking at the RSI indicator on its own.

Dollar cost averaging

Dollar cost averaging is about as simple as trading strategy gets – you split your ‘dollars’ up over a period of time.

You can actually use this strategy in any currency. All that’s required of you as a trader is to determine the total position size you want to speculate with and, instead of putting it all into one trade, you split it up over set intervals of time or set market conditions.

For example: ‘on Friday at this time for four weeks, or once a week when Dogecoin hits this specific price, I will trade AU$25 to make up the total AU$100 I want to trade on Dogecoin’.

What dollar cost averaging aims for is an overall average of profits made over the space of several trades, versus the ‘all eggs in one basket’ approach of taking out a single bigger position. With this strategy, you’d hope to see more gains than losses over a period of time. Due to this, it’s usually best suited to a longer-term trading style.

How to buy and trade Dogecoin summed up

• Dogecoin is a cryptocurrency that has grown in value and in cult followers since its launch in 2013
• You can take a position on Dogecoin by either investing in coins outright or speculating on the Dogecoin price via trading
• While investing in Dogecoin makes a profit if the Dogecoin price appreciates over the long term, trading Dogecoin means you can make a profit or loss whether its price rises or falls
• Vital to a successful Dogecoin trading strategy is analysing its price movements. There are also a few specific trading strategies that have at times been more effective for Dogecoin’s unique movements and properties as an asset

Footnotes

¹ Tax laws are subject to change and depend on individual circumstances. Tax law may differ depending on jurisdiction.

²Based on IG Group's OTC data for October 2019