A guide on understanding the common terms used in crypto trading

A guide on understanding the common terms used in crypto trading

Looking through the thousands of websites and forums that contain useful information on cryptocurrency seems fun. It is an excellent way for you to learn what you need to know about the cryptocurrencies and how they work. But, if you do not have a clue about what people are talking about, you will have a difficult time understanding the basics. Frustrating, isn’t it? Well, before you delve into cryptocurrency, here are some basic terms that you need to know. This glossary will have the terms that you are most likely to come across in your research.

Fiat

This represents all government-issued currencies. These currencies are issued by the government and controlled by banks. A great example is the US dollar.

Exchange

These are all the websites where you can go to buy and sell different cryptocurrencies. These sites will provide data points and surveys that will help you make the right choices. These charge high trading fees to reduce any security concerns that you may have as a user.

Whale

A whale is an individual who has a large amount of cryptocurrency. They are the wealthiest people in the crypto business, and they purchase the crypto continuously.

Limit sell, limit order, limit buy

These are the orders that traders make to buy or sell cryptocurrencies when the market price is low. These are like making a purchase when there is a for-purchase sign. They are orders that are bought and sold when traders place market orders.

Sell and buy wall

These are the avenues where trades see their limit and gauge their sell points. There is often an in-depth chart that provides traders with the information they need on when to buy and when to sell the cryptocurrency they have.

Bear/ bearish

This is an instance where the price is growing downwards or has downward sentiments.

Beartrap

This is literary just like a bear trap. It is when its prices of the cryptocurrency go downward for a while and will eventually continue with the upward motion.

Bullish

This is a positive sentiment mostly used when the prices have an upward movement. It is an expectation that the prices will go up during the trades.

Dumping

This can explain a situation where an individual is selling away their coins. It can also describe when there is an increasing pressure on users to sell their cryptocurrencies because the prices are plummeting. This often leads people to make losses.

Margin trading

This is when you need to magnify the intensity of any trades you make. Most users do this by risking their existing coins. It is a method that is only used by experienced traders who understand the market changes and how they can be profitable to them.

Going long

This is when the margin trades made will profit if the prices go up. Going short is the exact opposite. The margin trade will benefit even if the prices go down.

Altcoin

If you are looking for information on the trading prices of altcoins, you will not find any. Altcoin simply stands for alternative coins. It is information on digital currencies that are not bitcoins.

Block and blockchain

A block is a single package of permanent data transactions. It is what miners find when they get the cryptocurrency. Once the data transaction is completed, it goes back to the blockchain. A blockchain is a permanent database that stores information of all the blocks of data mined each day. Each time the block is created for data to be stored on it. It has a mathematical puzzle with a unique answer. Without these answers, the block will not be submitted to the blockchain. The answers are actually what cryptocurrency miners are looking for. There are unlimited blocks on each cryptocurrency. However, there aren’t as many answers. Therefore, miners find solutions that allow them to submit the block to the blockchain.

Fork

This creates different versions of the same blockchain. These versions are then split and can work on different parts of the same blockchain network. Hard forks make the previously invalid transactions valid, and soft forks make previously legitimate transactions invalid. These do not work inversely.

Hardware wallet

This is a physical device that allows you to safely store your cryptocurrency away from the computer. This reduces the risks of losses, especially if your laptop is hacked. The wallet is more like a sophisticated USB stick.

Arbitrage

This is when traders take advantage of the price differences of the commodities on two separate exchanges. This is often easy when there is a comparison for the ETH prices on Korean exchanges against the Us exchanges.

TA

This is also known as the Trend analysis or technical analysis, which allows you to examine the current charts to predict the movement in the market.

Mining

You have possibly read this word countless times on this guide. It means solving the next block. For you to achieve this, you require an obscene amount of computer processing power that will work effectively. The reward for this job is ether.

Ether

Ether is a cryptocurrency created by the Ethereum platform. It is often a reward for miners for computations performed, and the currency is the only acceptable payment for all transactional fees.

Pump and dump

This a recurrent cycle where an altcoin starts getting a lot of attention then decreases in value. This often causes its prices to increase quickly, and a considerable crush usually follows this. This often leads to huge profits for the first buyers who buy and sell quickly. But, the traders who buy later will make huge losses.

Bagholder

This is an individual who continues to hold on to the altcoin even after the pump and dump. This is also a person holding on to a coin that is sinking in value when there are other, more profitable alternatives.

Conclusion

Now that you understand the different terms used in cryptocurrency trading, you know what to look for when buying. It also allows you to understand various positions better.