How to Trade Dash in 2022 - Complete Guide
As digital currencies become increasingly more significant in the world, the values of Dash (symbol: DASH) and other altcoins have seen a huge increase since the early days of crypto. Prices have also been impacted by speculation, as both new and experienced traders are currently keen on trading digital forms of money in order to capitalise on the inherent volatility of these assets.
In this guide, you can find all the information and tools necessary to trade DASH in an informed and ultimately profitable manner. You'll learn the basics of fundamental and technical analysis, price predictions, and limiting your risk when trading.
What is Dash Trading and how is It Different from a Standard Purchase?
The main difference between buying Dash tokens as an investment and trading with them is your intention. You may make a standard purchase if you want to hold onto Dash tokens as a long term investment, however you will focus on trading if you wish to generate more frequent profits from short-term price movements.
Furthermore, most traders will use derivative products such as CFDs, options contracts, and futures to speculate on DASH’s price. This means that traders rarely own the underlying asset itself, but just derivatives products that are linked to its price. This relieves the trader of the responsibility of securely storing and managing the coins themselves, but also imbues him with some counterparty risk.
With regards to derivative products, there exists a wide variety. That being said, three sorts of derivative contracts are broadly used for trading Dash, including:
- CFDs - Contracts for Difference, which are generally known as CFDs, are agreements that entitle you to the money you put into a trade in addition to the profits or losses you make on your position when it is closed. In the event that the value reacts as per your forecast, you make financial gains, otherwise your losses are deducted from your initial capital.
- Futures - These are derivative contracts that commit the trader to close their order on a particular date. If you guessed the direction of Dash’s price movement correctly, you will enjoy profits on settlement day. Otherwise, you will incur a loss.
- Options - This is a more adaptable type of contract where a trader has the ‘option' to execute their order on settlement day. The holder is not, however, obliged to execute the position if it is not profitable. In exchange for this flexibility, options contracts themselves command a price, which is referred to as a ‘premium’.
One of the significant advantages of trading derivative contracts is that you don't need to manage the issues related to purchasing and storing Dash tokens. You neither need a crypto wallet nor need to stress over the security of your coins. Trading permits you to bring in cash in a straightforward manner.
When you select a cryptocurrency broker, you have to make sure that it's registered as well as adherent to Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines. These regulations, though annoying and time-consuming at first, prevent predatory actors from defrauding you, so are actually a net positive.
Bear in mind also that the range of derivatives available to you may vary depending on your geographical location, and the jurisdiction in which the broker or exchange is registered.
Copy-trading can be a great introduction for a lot of new traders, and is a feature offered by many socially geared trading platforms. Sites with this feature allow you to mimic the trades of veterans who choose to share their moves, giving you a helping hand in beginning to understand the way the cryptocurrency market works.
This can be a great first step on your DASH trading journey, but don’t follow experts blindly: some trades may be part of a larger strategy that you can’t see, and many pros will have in place risk mitigation protocols to which you will not have access.
Where Can I Trade Dash?
Here is a shortlist of the best Dash brokers, curated for your convenience.
Online brokers offer a frictionless entry into the DASH market, and you can start speculating on price movements with ease. One thing that you should know about is that when you trade with the help of a broker, you're not really purchasing DASH. What you're purchasing is an agreement that entitles you to the capital you've contributed alongside any profits or losses you make when the position is closed. Most brokers will offer CFDs and other similar derivatives, allowing you easy exposure to DASH.
Benefits of Using a Broker to Trade Dash
One of the biggest advantages of trading cryptocurrencies like Dash through a broker is that you don't need to worry about securing and storing your coins, which can be an intimidating process for new investors. The broker will take custody of coins for you, and allow you to speculate on their value indirectly. You can begin your trading venture with just $100, or sometimes even less, providing a low barrier to entry. Reputable brokers will always be KYC and AML compliant as well, meaning that you needn’t worry about the safety of your funds.
Although cryptocurrency exchanges initially existed for the sole purpose of buying coins with fiat money, most now offer advanced trading features including derivative products. If you have an account with a leading exchange such as Binance, Poloniex, OKEx, or Coinbase, you can start speculating on Dash’s price right away without setting up an account elsewhere. Exchanges also accommodate leveraged trades.
Benefits of Using an Exchange to Trade Dash
Modern derivative exchanges essentially combine the functions of a traditional exchange with a brokerage, offering diverse financial instruments as well as high liquidity for swaps. Futures and options contracts allow for easy exposure, and offer you the opportunity to magnify your profits using leverage. Due to their crypto-specialised nature, exchanges typically offer a large number of trading pairs, allowing you to trade your DASH tokens against a wider range of other assets.
Our Step-by-Step Guide on Dash Trading
To make your DASH trading a lot simpler, we have made an outline of central topics that you have to know about.
1. Combine Fundamental and Technical Analysis
Fundamental and technical analyses will form the backbone of your trading strategies. Fundamental analysis refers to the assessment of the qualitative properties of Dash: non-technical factors, usually at the macro level, that could affect the token’s price.
- News - Current affairs relating to Dash are often highly correlated with price movements. Look out for developments in regulation, adoption, collaborations, and other areas that could affect dash. Crypto news moves fast, and so do markets, so it is imperative that you remain plugged into the space in order to keep up.
- Supply and Demand - Dash has a limited supply, and so over time, this supply shock will affect how the market behaves. Furthermore, demand for Dash will respond to various factors, such as the news, or a newly found need for the services it provides. Be aware of these two variables and their interplay.
- Follow the General Rules of Economics – The relationship between supply and demand is easy to understand. An increase in demand combined with a contraction of supply will acutely raise prices. Contrarily, an expansion of supply with a subsiding demand will cause prices to fall.
While fundamental analysis can often help to illustrate the big picture, it is technical analysis that will give you the most insights as to the movements of the market itself. The indicators below are some of the most used by traders, and will help you to better anticipate price fluctuations.
- Moving Averages - A moving average tracks the average price of Dash over time, with a greater weight given to more recent values. This gives a better impression of the present direction of price movement. Exponential moving averages, or EMA, give an even greater weight to recent prices.
- Relative Strength Index - Relative Strength Index, or RSI, indicates the overall sentiment of the market. A positive value means that buyers are dominating, whereas a negative reading means that sellers are in control. Readings above 80 or below 20 indicate overbought and oversold conditions respectively, and these can act as confirmations of a trend reversal.
- Moving Average Convergence Divergence - This specific marker determines the contrast between a 12- and 26-period exponential moving average. The MACD line is shown with a signal line (usually a 9-period moving average), and the interaction between these lines can indicate buy or sell signals. For example, when the MACD line crosses over the signal line, this can be a bullish confirmation, whereas a crossover beneath the signal line is considered bearish.
2. Choosing a Trading Strategy
While every trader out there is attempting to make profits, everyone takes a different approach and uses a different strategy for success. There is a wide range of trading methods that you can use to ensure that you can yield consistent returns through DASH trading.
- HODL: ‘HODL’ is a misspelling of ‘hold’, and is a staple of the crypto community’s vernacular. It refers specifically to the practice of buying coins like Dash and holding them for the long run. The trade may be closed after months or even years, with payouts being large if successful.
- Day Trading: Day trading involves opening and closing your positions within the span of a day. This allows traders to exploit the rampant volatility of the crypto market, and allows IOTA trades to generate profits for the trader several times more often than with HODLing.
- Swing Trading: Swing trades take place over slightly longer periods than day trades, often lasting a couple of weeks, and aim to latch onto a change, or ‘swing’, in market sentiment as it begins. This requires time and effort to predict correctly, but can deliver substantial profits.
- Hedging: Hedging involves opening a second position in the opposite direction to your main position. This ensures that your endeavours will still yield a profit even if your primary trade doesn’t go as planned.
- Scalping: Scalping involves capturing the value offered by small price movements, usually within the hour, minute, or even second range. These profits are usually small, but can be amplified using leverage, and scalps can be taken multiple times in one day.
3. Select an Appropriate Platform for your Needs
When deciding on the platform you are going to use, first choose whether you want to use a broker or an exchange. With a broker, you can trade with fiat money, and you don’t need to endure the complications of managing the actual Dash coins yourself. With an exchange, however, you will likely have greater access to leverage, as well as a wider range of trading pairs.
Regardless of your choice, you should only ever use AML- and KYC-compliant platforms, as these afford you protection from both regulatory woes and scammers. You should also consider the fee structures and features of all individual platforms, in order to choose the service that meets your needs the best.
4. Setting Up Your Account
Whenever you've picked your platform, join and verify your account through email. You'll have to validate your identification by uploading a copy of your government-issued ID, such as a driver's license or passport. This is done to ensure consistency with KYC and AML guidelines. After the validation procedure, you will be permitted to deposit your money using conventional or digital currency, subject to the service you are using. You should simply go to the service's wallet and pick the correct payment method.
5. Prepare your Trading Position
When you have made your account and made your deposit, you can start trading DASH by tapping on the 'Trade' button. Here, you will see different sorts of user interfaces depending on the platform you have chosen. There are some commonalities between all platforms, however, including a trading graph, the order book, and a price index.
Below are some examples of interfaces:
Short or Long Positions?
A long position refers to a position opened in the expectation of a price surge. You will buy when you think the price is low, and aim to sell high for a profit. Conversely, a short position allows you to profit when the price of DASH decreases.
This is done by borrowing DASH from the exchange or broker and selling it immediately for the market price. Later, after the price falls, you will repurchase the asset, returning to the lender to write off your debt. The price difference is yours to keep as profit.
Be careful though: if the price of Dash increases while you have a short position open, you will face the possibility of losing money. Always employ robust risk mitigation protocols when shorting Dash.
Limit or Market Order
You will see that there are two types of order available to you on most exchanges or brokerage sites. The first is a market order, which allows you to purchase the asset instantly, at the market price. Simply enter the quantity of Dash you would like to buy or sell, and execute the trade. A limit order allows you to specify the price at which you would like to buy or sell. This type of order may take a while to execute, as it requires the market price to converge with your limit price.
Trade Position Amount and Leverage
The position amount is simply the amount of capital you would like to invest in a trade, and leverage can be used to amplify this. Leverage involves borrowing capital from the broker or exchange, in order to increase the size of your position. If you use 10x leverage, your position size will increase by ten, meaning your profits and losses will be magnified tenfold. Be careful: although bigger profits are attractive, improper risk management here can leave you penniless.
Risk Management: How to Decide the Right Stop-Loss and Take Profit values for Your Dash Trade
Stop-loss and take profit orders are handy tools for managing your risk. Both are automatic orders that you can set up on any trading platform in order to lock in risk-appropriate profit targets and loss tolerances. A stop-loss will trigger if the price moves below a certain level, specified by you. This prevents an incorrect prediction from costing you excessively. Take profit orders, on the other hand, allow you to “fire and forget”, and will lock in profits for you when your desired target has been reached.
Review and Execute Your Dash Order
Before you execute your trade, make sure to check every one of the values you have entered. Human errors can end up being exceptionally detrimental with regards to trading, particularly when you've leveraged your position.
Close Your Trade for Profits or Limit your Losses
Once your trade is underway, keep an eye on it. When the trade has reached your expected level of profits, close it to seal the deal. Alternatively, you can use a take-profit order to make this automatic. On the flip side, if things don’t go to plan, cut your losses early, in order to avoid a more significant financial blow. Stop-loss orders make this a lot more efficient, and prevent you from losing out to a rapid market crash.
You should always do extensive research on your chosen platform before you actually begin placing trades. What are the fees? Are your funds secure? Is the exchange or broker prone to hackers or scammers?
When you have begun trading, make sure you employ a wide range of analytical techniques. A key insight is that you should never rely on just one technical indicator: RSI and MACD, for example, should usually be used as confirmations of a pattern, rather than outright evidence. Until you have a better feel for the movements of the market, you should rely on as many indicators as possible, but with that said, experience is the best teacher — and that may include making your first loss!
Frequently Asked Questions
Dash trading can generate supplemental income for you but it cannot fully replace your primary day job income right away.
Dash has already crossed the barrier of $300 in February 2021 and is currently trading near that price. It has the potential to do it once again.
If you are trading futures, you are time-bound to close your position. However, options give you the ability to choose if you want to execute the buy order or not.
Altcoins, another word for cryptocurrencies other than Bitcoin, are always moving up and down the market cap leaderboard. You should conduct strong fundamental analysis to determine how Dash will perform in relation to other alts.