19 Cryptocurrency TRADING terms you need to know.
There’s a lot of different information out there about all the different crypto protocols and token projects, but there’s very little guidance when it comes to actually trading them! In our last edition, we covered 21 terms that we felt would help you with general cryptocurrency knowledge. This time around we’ve included 19 terms that will help familiarize you with how to trade cryptocurrency… with Coinstack!
1. Arbitrage
With so many different tokens and coins being listed on different exchanges their prices can fluctuate slightly across each platform. Arbitrage is when a trader buys a lower priced token from one exchange and then transfers it to another exchange where the price is higher and then sells it.
2. ATH/ATL
The ATH and ATL are representative of the “All Time High” and “All Time Low” of a specific token. This will be the absolute highest or lowest price a token has been since its inception.
3. Bearish
When the term “bearish” is used in the context of cryptocurrency trading it means that the market or specific token is experiencing a downturn and has an overall negative price movement. An investor that believes a stock or currency will fall over time is referred to as a “bearish investor”.
4. Bear Trap
A bear trap is an incorrect signaling of the reversal of a rising price trend. A bear trap is a common method used by organized groups of investors to sell their assets at the same time in an effort to trick the market into thinking that the price is dropping so others will sell as well. When there has been a satisfactory dip in the overall price, the syndicate of traders will then buy back their stocks or currencies at an artificially lowered price and resume driving the market upwards.
5. Bullish
Being bullish in respect to cryptocurrency and stock trading means that the investor expects there to be a rising price trend.
6. Buy/Sell Wall
When there is a large limit order that has been placed to buy or sell at a certain value, this is referred to as a wall. A buy wall is what happens when the amount of buy orders for a token or coin are disproportionately higher than the amount of sell orders. And as you can probably infer, a sell wall is what happens when the amount of sell orders at a specific point for a token outweigh the amount of buy orders!
7. Circulating Supply
The circulating supply is the number of tokens or coins that are publically traded at the given moment. Certain projects have coins in reserve, or can even lock or burn them in an effort to adjust the market price, which is one of the many reasons it’s important to stay up to date with the projects you’re investing in!
8. Depth Chart
Depth charts that essentially visualize the supply and demand at different price points. Generally, they will have two sectors with one representing the bids (buy orders) and the other representing the asks (sell orders). A depth chart will help traders to actually see buy and sell walls, and even the point at which the market is immediately accepting orders.
9. Dump/Dumping
Dumping is when there is a massive downward movement in the pricing trend due to a large sell-off by a single individual or group of investors.
10. Fundamental Analysis
It’s important to always do your homework when investing. So many projects have similar conceptual end goals but large underlying differentiators. As a result, it’s important to conduct a fundamental analysis of the potential asset you’re interested in. This means looking at economic and financial factors, team composition, market opinion and many other basic factors before investing.
11. FUD
Fear. Uncertainty. Doubt.
These are all tools used by people looking to manipulate the market in favor of their preferred asset. They’ll spread fear, uncertainty, and doubt in respect to the other tokens so that you’re more likely to support their goals… one of the reasons that your fundamental analysis is so important. It allows you to differentiate the misinformation from the actual substance.
12. HODL
HODL is a term that originally started out as a meme in the cryptocurrency world but has now become ubiquitously interchangeable with any strategy guiding a trader to hold onto their asset for an extended period of time. The term was born of a trader in 2013 who posted a typo on the Bitcoin Forum “I AM HODLING,” originally meaning to state that they were “holding” the coin. Other interpretations also see it as an acronym for “Holding On (for) Dear Life.”
13. Margin and Leverage
These two go hand in hand. A margin is a loan provided by the exchange which lets you leverage the funds in your account to make larger transactions than you normally would have been able to. The loan will be backed up by the funds and value of the margin account and will need to be paid back in full with interest.
A margin is also used to create leverage, which allows a trader to spend less than the total price of a trade. In turn, they can enter larger positions than they would normally be able to with the actual funds in their account. It’s important to note that only margin account holders are offered leverage. For example, if an investor or trader has a 4:1 leverage, it means that individual could hold a position four times the actual totality of their funds. With $10,000 in their account, they could invest in up to $40,000!
This can be a great way to gain funds quickly… or lose them!
14. Limit Order
A limit order can manifest as a limit buy or a limit sell. These will be specific points in which your account is ordered to perform an automated trade. If you suspect a currency is going to climb overnight it’s important to set a point at which you want to sell it to retain the generated profit. Or inversely a sell order can be placed to automatically sell off an asset to protect the profit that you’ve generated before it sinks too low.
15. MACD
The “Moving Average Convergence Divergence” or “MACD” is a technical analysis indicator that points towards the strength, momentum, and duration of a cryptocurrencies trend. MACD compares and contrasts different sized data-sets referred to as “Exponential Moving Averages” into two signal lines and a histogram which then point towards specific trends. This topic gets pretty in-depth so we’ve linked one of our favorite trading guides so you can read more about it here.
16. Overbought/Oversold
When a cryptocurrency is overbought this means that the market is too bearish in regards to that asset, and traders can expect a large correction in the market sometime soon. When an asset is oversold that means that the current market price of that token or currency is underneath its actual value and there’s room for growth.
17. PND
An acronym for Pump and Dump. This is a type of market manipulation where a group of investors will spread misinformation in an effort to get other individual traders to support their token project. Once the price has been artificially inflated through their misguidance, they will sell off and take the profit while leaving other traders to suffer with their asset that most likely isn’t representative of what they were promised.
18. Relative Strength Index
An indicator popularized almost 40 years ago by J. Welles Wilder and utilized to signal when a market is overbought or oversold. The way it works is by evaluating the magnitude of previous price changes over a specific time period as well as taking into account the speed of those movements. These considerations are recommended to be taken into account over a 14-day period. The general rule of thumb is that an RSI above 70 is considered overbought and an RSI of below 30 is considered oversold.
19. Whale
A term that is used in investing circles to describe an individual or group of investors that have a large amount of one asset and are able to manipulate the market to a greater affect than the vast majority of other traders. A large sell off by a whale will result in a steep price decline, where a large buy by a whale will result in a notable price increase… much more so than any one average trader could affect the market!
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