So, you’re getting into trading, hoping to hustle on the side and make a few more easy-earned bucks. Here’s a beginner’s list of the top 20 crypto trading terms you need to know, before you start trading, before you pick a course, before you even hover your cursor over the “Register” button on Binance. Read this first, lovable newbie!
A coin is said to be bullish if the price is rising. Think about it like this: bulls have horns, and these horns go up, just like the price of a bullish coin.
A coin is said to be bearish if the price is falling. We’ll use another analogy: bears have claws, and they point downward, just like the decreasing price of a bearish coin.
When you enter a long position, or “long” a coin, you’re buying a coin, and betting that the price of the coin will go up. You’ll sell it off when it reaches a peak, and your profit will be the difference in price between when you entered the long position and exited it. Long = Buy.
When you enter a short position, or “short” a coin, you’re selling a coin, and betting that the price of the coin will drop. When it does, you’ll buy back the coin at a lower price and make in profit the difference between the price when you entered the position and exited. Short = Sell.
5. Day Trading
Day trading is a short-term trading strategy where traders enter and exit positions within the same day. You’ll be in a trade from anywhere around a few minutes, to a few hours. This is a more profitable trading strategy than swing trading (see next), because you can enter and exit many positions in the same day. However, it’s also a riskier trading strategy, as coins are very volatile on short time frames.
6. Swing Trading
Swing trading is a long-term trading strategy where traders enter a position and exit a position over the course of days, weeks, and sometimes months. This is a less profitable trading strategy, as you’ll only profit from long-term trends in the coins (not fluctuations in the minute/hour charts). However, it’s also a safer trading strategy, and it doesn’t require you to be constantly analyzing the charts. You can throw your capital into a coin, check it once a day, and be done.
An altcoin refers to any cryptocurrency coin that isn’t Bitcoin. As you can imagine, it stands for alternative coin.
8. Fundamental Analysis
There are two main types of analysis used when determining whether the price of a coin will rise or fall. One of them is fundamental analysis. This is the study of wider economic factors causing fluctuation in the price of a coin, such as industry news & trends, blockchain data, and economic conditions. This is the lesser-used of the two types of analysis.
9. Technical Analysis
This is the second type of analysis used to determine whether the price of a coin will rise or fall. Technical analysis attempts to predict the value of a coin based on past trends. To perform technical analysis, traders study the price action chart, identify patterns, analyze candlesticks, and use a variety of technical indicators, to predict upcoming price trends. This is the main type of analysis used by day traders, and the only one you need.
There’s a bit of debate on the meaning of “Hodl.” Originally, when Bitcoin dropped by 39% in December of 2013, a drunken trader posted “I AM HODLING” on a crypto forum. Other people like to think that it stands for something such as, “Hold on for Dear Life.” Either way, it refers to traders who long a coin, and hold onto their position regardless of how much the price of the coin drops, in the hopes of that coin’s price rising again in the future.
11. Market Trend
A market trend is the direction the price of a coin is going (increasing or decreasing). We can see market trends using price action charts.
12. Market Order
When you place an order (long or short) on your crypto exchange, you have two options: limit order and market order. When you place a market order, the order will be filled at the market’s best current price. You don’t have control over the price that you sell/buy at. This is used when you want to enter or exit a position as quickly as possible.
13. Limit Order
This is the second type of order you can place. A limit order allows you to specify the price that you want to sell/buy at. If you’re buying, your order will be filled at this price or less. If you’re selling, your order will be filled at this price or higher. This gives you more control over your entries, exits, and profit margins, but it’s also riskier. If you want out of a trade now and the market never reaches your specified price, then your order won’t be filled, and you’ll lose the trade.
14. Stop Loss
A stop loss is an order that’s triggered when a coin reaches the price you specified in the order. This is used to mitigate losses. You should set a stop loss the minute you enter a trade. Determine the last price at which you’re willing to take a loss (the largest loss margin you’re willing to take), and set a stop loss there. If you’re losing a trade, this will allow you to exit the trade without massive losses and the risk of liquidity.
15. Price Action Chart
Technically, price action is the plotting of a coin’s price over time. Less formally, these are the charts with red and green candlesticks that show you the price of a coin in real-time, and that coin’s past trends. This is the main factor used in technical analysis.
These are the red and green bars you see on price action charts. There are many different kinds of candlestick patterns used in technical analysis to predict price trends, such as the doji star, hanging man, evening star, morning star, rising sun, hammer, and inverted hammer, just to name a few.
A region of support is also sometimes referred to as a floor. This is a region at which the price of the coin has historically seen a lot of support, with buyers pushing the price upwards.
A region of resistance is also sometimes referred to as a ceiling. This is a region at which the price of the coin has historically seen a lot of resistance breaking through, with sellers pushing the price downwards.
Indicators are the main factors you’ll be using in technical analysis. There are dozens upon dozens of indicators, but you’ll only be using a few, including MACD, RSI, volume, EMA’s, and possibly a few others. Each of these displays a different, quantifiable characteristic of the coin over time. EMA’s, for example, show the estimated moving averages of a coin over time.
20. Pump & Dump
This is a scheme where buyers will buy a significant amount of a coin (pump up the price), and then sell it all at once (dump the coin), making a huge profit in the meantime. Watch out for pump & dump schemes, and coins with low volume (susceptible to market manipulation such as this), because you will not see these price shifts coming. They hit like a brick, believe me!
And there you go – the top 20 beginner crypto trading terms you must know, before you start trading. If you’d like to see an article discussing the different technical indicators you’ll need to know to get started trading, comment below!
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