Dogecoin Futures Trading Guide: What Is It and How to Start
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Dogecoin’s volatility makes Dogecoin futures trading one of the most popular ways to profit from crypto. Daily ups and downs create an opportunity for both long and short trades, and DOGE futures trading allows traders to use leverage to amplify their gains.
Trading futures comes with both pros and cons, and futures trading can even vary slightly from one platform to the next. In this guide, we’ll discuss how to use futures and some of the key considerations surrounding leverage. We’ll also share our top picks for the best Dogecoin futures platforms and walk through the easiest way to get started. Let’s begin with an overview of DOGE futures.
What Are Dogecoin Futures?
Dogecoin futures are a powerful tool for trading the price of DOGE. When trading futures, you’re not buying or selling the actual asset. Instead, you’re trading a contract based on the price of the asset. Futures are a bet on the future price and price direction.
The most common way to trade DOGE futures is by using Dogecoin perpetual contracts. Unlike traditional futures contracts, perpetual futures do not have an expiration date, so you can keep the trade open indefinitely. However, margin requirements and funding fees add some complexity to the trade, and may force you to close the trade earlier than expected.
Dogecoin futures trading uses (optional) leverage, which can amplify gains, but which can also hasten losses if the market moves against your trade. Traders can enter or exit trades at any time, and the minimum trade is usually relatively low, often $10 or less. In a later section, we’ll explain the mechanics of a futures trade in more detail.
Dogecoin Futures vs Spot
Spot trading refers to the value of an asset right here and now (on the spot). Traders buy at the spot price, take delivery to their crypto wallet, and sell at a later date. While spot trading is still the first type of trade most traders make, futures trading sees higher trading volume and offers more flexibility.
Spot trading’s simplicity makes it beginner-friendly. However, it’s not the most capital-efficient way to trade. Additionally, basic spot trades don’t allow traders to bet on a lower price.
By contrast, futures contracts allow traders to go long (bet on a price increase) or short (bet on a price decrease) and use up to 50x or even 100x leverage in the trade. This means you can control a $1,000 trade with $10 (100x). Dogecoin futures provide a way to trade the market in either direction, profit from dips or rallies, and trade more efficiently.
Some traders even use futures to hedge a long spot trade, profiting from short-term retracements. This strategy can prove helpful when your long-term Dogecoin price prediction is bullish but you expect a short-term pullback.
Let’s look at how Dogecoin futures work when using perpetual futures, which are much more common, and then compare that to delivery futures.
How Does DOGE Futures Trading Work?
Dogecoin futures use a contract called a perpetual futures contract. Other names for these contracts include perpetual swaps and “perps.” Traders aren’t trading the physical asset, Dogecoin, in this case. Instead, they trade the contract price. Perpetual futures contracts closely track the spot price by using a mechanism called funding rates. In short, if the trade is too heavy on one side of the trade, that side pays a fee to the other side.
- Positive Funding Rate: When the contract price is above the spot price, long traders pay a funding fee to short traders.
- Negative Funding Rate: When the contract price is below the spot price, short traders pay a funding fee to longs.
Funding fees change periodically throughout the day, encouraging traders to close positions or switch sides when the contract price diverges from the spot price.
DOGE futures trading also makes leverage available to traders, often up to 50x, 100x, or even 300x. Margin futures trades use collateral (margin) to make larger trades with a comparatively small amount of funds backing the trade.
For example, $10 in USDT can control a $1,000 DOGE futures position using 100x leverage. In this example, the $10 committed to the trade is the initial margin in the trade. Most platforms also require a maintenance margin, which is often half of the initial margin. So, if the trade equity falls below $5 in this example, the exchange can liquidate the position. A 0.5% downward move in DOGE can cause the position to be closed at a loss due to the high leverage.
However, let’s look at a successful trade in which DOGE goes up by 1%. In this case, the position will earn $10, less any fees that apply to the trade.
Dogecoin Perpetual vs Delivery Futures
Although rare for Dogecoin, other types of futures contracts exist. Two of these types use expiration dates, typically quarterly: delivery futures and cash-settled expiry futures. These contracts also offer leverage, but rather than using funding fees to peg the contract value to the spot price, the contract price eventually converges with the spot price as expiry approaches.
The term delivery futures is often used interchangeably with cash-settled expiry futures in crypto, although they differ as a technical matter. In crypto markets, virtually all futures contracts for Dogecoin are cash-settled, meaning there is no physical delivery of the underlying asset. This is true even for leading assets, such as Bitcoin and Ethereum.
How to Trade Dogecoin Futures: Step-by-Step Guide
Let’s look at how to get started with DOGE futures trading using CoinFutures. The CoinFutures platform simplifies the process, turning bets on the price of cryptocurrencies into a simple Up/Down selection, but with the ability to add a multiplier for leverage and optional automatic trade settings.
1. Open a CoinFutures Account
Visit CoinFutures to open an account. Provide an email address and then choose a username and secure password. Be sure to provide an email address you can access for verification.
CoinFutures also allows anonymous logins using the MetaMask crypto wallet.
2. Download the CoinFutures App
Navigate to the download page to download the app for your operating system. CoinFutures supports Windows, macOS, and Android (APK).
3. Fund Your Account
Once the app is installed, sign in and look for the wallet icon in the top menu. This page will guide you through funding options. CoinFutures supports crypto deposits on several popular crypto blockchains, including Ethereum and Bitcoin.
4. Set Up Your Trade
Select Crypto Futures from the top menu and read the 4-step tutorial, which walks you through the basics. Next, select DOGE/USDT for your trading pair.
Then, set up your trade by choosing a price direction, wager, and multiplier. By default, the multiplier is set to 10x, but you can choose any level between 1x and 1000x. Higher leverage equals higher risk. CoinFutures also displays a Bust Price, which indicates the price at which the trade has lost all its value.
Notably, the bust price serves as a proxy for a maintenance margin on more complex platforms. CoinFutures also simplifies funding fees. Rather than variable funding fees that can go in either direction, the platform charges a flat fee (0.05%) each hour the trade remains open.
5. Set Your Auto Bet
Optionally, you can set automatic actions to close your bet at levels you define.
- Take Profit closes the bet at a specific price or profit level above the opening price.
- Close Bet closes your position automatically to prevent further losses if the trade is losing money.
Check your settings and place your bet. If you’re not using auto bet, monitor your position so you can close it manually.
Best Platforms to Trade DOGE Futures
The trading efficiency provided by futures makes them a popular way to trade crypto, and trading volume for futures outpaces spot trading volume on many exchanges. Let’s look at some of the best Dogecoin futures platforms and what each offers.
- CoinFutures: The CoinFutures platform is our top pick due to its simplicity and easy access. CoinFutures does not require Know Your Customer (KYC) identity verification and provides easy funding via crypto deposits on several popular blockchains. This simulated trading platform supports leverage of up to 1000x, but defaults to a safer 10x. Funding fees are also simplified. The platform charges a 0.05% fee each hour the trade remains open, making it best suited to short-term trades.
- MEXC: The MEXC exchange offers a vibrant platform for perpetual futures trading and provides one of the largest crypto selections on the market. Recent changes enable up to 500x leverage on leading cryptocurrencies like BTC and ETH, with up to 300x on Dogecoin futures. MEXC also offers a demo account where traders can test futures strategies or learn trading without risking real money.
- Binance: The Binance exchange has grown to become the largest crypto exchange by trading volume, with futures trading more than tripling spot trading volume on the platform. Daily trading volume of more than $1.6 billion in DOGE futures trading helps ensure tighter spreads for better trading efficiency. Trade with low fees and up to 75x leverage on Dogecoin.
- Margex: The Margex trading platform built its business around futures trading, offering an inviting interface that streamlines the trading experience. Although limited to 25x on Dogecoin futures, Margex has become popular due to its no-KYC policy and its vibrant copy-trading platform. Users can follow the trades of successful traders on the platform, making Margex accessible to traders of all experience levels.
Benefits of DOGE Futures Trading
Dogecoin futures trading brings several benefits, including the opportunity for a higher return on investment compared to spot trading and better trading efficiency due to leverage and higher liquidity. Let’s look at some of the key advantages of DOGE futures trading.
Short Selling
Dogecoin futures trading provides the opportunity to trade the market in either direction. If you think Dogecoin will go up, you can buy Dogecoin on the spot market or trade futures. However, if you think DOGE will dip or think a downtrend is imminent, DOGE futures trading provides easy access to trades betting on a price decrease. DOGE offers plenty of dips and rallies for active traders.
Leverage
By using leverage, your margin backs the trade. $100 in capital powers a $1,000 trade at 10x leverage. Gains (and losses) are also amplified. This means a 1% price move using Dogecoin perpetual contracts is equivalent to a 10% move in spot markets. However, a 10% move in spot prices can take a long time. Futures provide the ability to turn over trades quickly using daily volatility as a flywheel to build a larger trading portfolio.
Capital Efficiency
Leverage allows larger trades with smaller amounts of capital. This makes trading more efficient. At 5x, one leveraged trade can replace five spot market trades, while also providing the ability to trade the market up or down.
In addition, futures markets tend to offer more liquidity compared to spot trading. More trading volume means you can trade in or out of positions with less slippage. This becomes especially important with assets like Dogecoin that typically see lower trading volume than BTC or ETH.
Hedging
Dogecoin futures also provide a way to hedge long-term positions. Let’s say you have a $1000 long position, perhaps waiting to see if Dogecoin will reach $1 someday. But the charts point to a short-term dip. Rather than sell the long position, possibly triggering a taxable event, you can open a Dogecoin futures short position to hedge against the expected dip. Earning from this example trade can help build your long position, or you can use your earnings to trade the next dip.
Risks of Dogecoin Futures Trading
While DOGE futures trading offers several benefits over traditional spot trades, it’s also important to consider the risks associated with leverage and the structure of futures contracts.
Liquidation
DOGE futures trading uses margin to back the trade, with a maintenance margin requirement that’s typically half of the initial margin used to open the trade. If the market moves against your trade and the remaining maintenance margin falls below the required threshold, the trading platform will liquidate the position to cover the trade. In most cases, you’ll keep any remaining trade equity after liquidation fees are deducted.
In simple terms, it’s possible to lose your entire investment with futures trading, making futures riskier than spot trading for established assets. To mitigate risk, many experienced traders follow the 1% rule: never risk more than 1% of your trading portfolio on a single trade.
Volatility
Futures trading thrives on volatility, but it’s possible to have too much of a good thing. Sudden market moves can cause a well-planned trade to go off the rails. Higher leverage increases the risks associated with volatility, whereas lower leverage may provide enough cushion to ride it out until the trade is back on track.
Volatility is such a prominent risk that many trading platforms maintain a self-insurance fund (funded by liquidation fees) to help ensure the platform can remain solvent if liquidations can’t happen quickly enough during extreme volatility. For example, MEXC, which offers higher leverage than most platforms, maintains its own MEXC Insurance Fund for Dogecoin and other futures assets.
Funding Rate Risk
Earlier, we discussed how exchanges use funding rates to keep the contract price close to the spot price. Funding rates can be a net positive or negative, depending on which side of the trade is heavier, and it’s possible to shift from negative to positive during the duration of a trade. However, this often-unpredictable variable can chip away at trade equity and push maintenance margin levels to dangerous levels, risking liquidation.
Steeper Learning Curve
Spot trading is easy: buy now, sell later, hopefully at a profit. The driving force behind the trade relies on whether you think Dogecoin is a good investment. By comparison, futures trading brings more complexity to the trade. Trades often need close monitoring or advanced settings like take-profit orders and stop-loss orders. MEXC offers a simulated futures trading environment with its demo account. This feature allows traders to practice safely without risking real money.
Regulatory Uncertainty
In the US, the Commodities Futures Trading Commission (CFTC) oversees trading for digital commodities. However, many exchanges aren’t registered in the US and may or may not be regulated elsewhere. While DOGE futures trades typically target short-term opportunities, using an unregulated platform could introduce additional risks. The FTX exchange collapse served as a reminder of the risks associated with exchange insolvency.
Fees
Trading fees for futures are generally low in percentage terms when compared to spot trading fees. However, you pay trading fees on the leveraged trade amount, which can become costly on high-leverage trades.
Conclusion
Dogecoin’s volatility makes it a popular choice for futures traders. The daily price moves create opportunities on both sides, whether betting on dip or a rally.
The leverage available with Dogecoin futures puts fast gains within reach for nearly any budget. Platforms like CoinFutures let traders bet as little as $1 on DOGE futures trading.
However, futures trading comes with risks as well, the most notable of which is the possibility of liquidation. Use leverage wisely, plan your trades thoroughly, and, as always, never bet more than you can afford to lose.
Visit CoinFuturesFAQs
Where can you trade Dogecoin futures?
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References
- Join trading of DOGE Perpetual Futures (mexc.com)
- Binance Perpetual Markets (coingecko.com)
- The 1% Rule: A Key to Long-Term Trading Success (tradingview.com)
- Balance of Insurance Fund (mexc.com)
- How to Use Demo Trading on MEXC Futures (mexc.com)
- Digital Assets (cftc.gov)
- A timeline of the collapse at FTX (apnews.com)
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