Crypto Trading Terms You Must Know: A Guide
What if I tell you right now that trading is after all not that hard? It’s true, cryptocurrency volatility and late 2017 prodigious rise of asset prices shifted all the attention to Bitcoin. As a result, mainstream media couldn’t help but rave about cryptocurrency, the blockchain, ICOs, and altcoins. Let us learn about Crypto Trading and all the terms on this article.
The bug bit you and by reading this, you are keen on ramping up, absorbing as much knowledge as you can as far as crypto trading is concerned. Like trading Forex and the stock market, cryptocurrency is a niche, a multi-dimensional field that has attracted experts from finance, computer science, software engineers, psychologists and many more. The list is just endless. What I’m trying today is that crypto is an emerging field merging disciplines that were thought to be incompatible via cryptography.
Crypto Trading Terms That You Must Know
However, before you begin trading, it’s advisable to have these technical jargons by your fingertips lest cryptocurrency trading feels like swimming in the deep end of the pool. These are some foundation crypto trading terms you should know before you delve in:
Airdrop: Like the literal meaning of the term, a cryptocurrency airdrop is when there is free distribution of coins or tokens. Airdrops are incentives and a form or marketing attracting usage to a platform. Legacy platform users can also get an airdrop when the coin splits or hard forks. For example, during Bitcoin Cash hard fork, Bitcoin legacy holders had a free Bitcoin Cash coin airdrop.
All-Time High: The highest price a coin or token price has reached so far.
Bags: These are coin or crypto asset holdings bought at prices higher than spot prices. An investor with lots of these coins is called a bag holder.
Bullish or Bearish: A bullish market is when prices are trending upwards printing series of higher highs. On the other hand, a bear market is when prices are edging lower or stagnant. As a general rule, traders should buy in a bullish market and unload their bags in a bear market.
Long/Short: When a trader is long, then s/he is convinced that market prices will rise. Conversely, when s/he is short then their bet is for asset prices to drop.
Buy low, Sell high: These are strategies in place for profitability. A trader should strive to catch a bull market, buy low and sell high and not the other way round.
Buy the Dip: Depending on the type of trader, it is advisable to employ this strategy especially when you plan to hold the coin for a while. When you are buying the dip, a bull trend should first be identified. Afterward, the trader should buy the coin when the price of the asset temporary goes down.
Laddering: When a trader is laddering, he/she has identified a trend and to increase profitability, they set incremental sell or buy orders often on dips in an uptrend or pullbacks in sell trend.
Maker/Taker Fees: Maker Fees are charged for liquidity creators or traders with limit orders. Taker Fees apply to traders that withdraw liquidity by buying or selling assets at market rates or spot prices. Maker fees are usually lower or free than Taker fees.
Panic Selling: The act of selling at the loss for fear that prices will further drop.
Pump and Dump Schemes: This is a coordinated move to intentionally manipulate prices by buying assets en masse, otherwise known as pumping, and when a bullish illusion has been contrived, perpetrators sell the coin on a high—dumping.
Exchange: A platform where investors from all over the world buy and sell digital assets as Bitcoin or Ethereum. For every trade, an exchange charges maker or taker fees.
Market Maker: They work closely with exchanges and their work is to provide liquidity allowing traders to open positions in ranges by placing limit orders on the exchange’s order book.
Ask Price: The minimum price a trader is willing to sell an asset.
Bid Price: The maximum price a trader or investor is willing to buy an asset.
Spread: The difference between ask and bid prices. Spreads are market makers’ profits. The more the liquid an asset, the lesser the bid-ask spread.
Sell Wall: An influx of sell orders on an Order Book for an asset which appears to be on a discount. Most of the time, the intention of a Sell Wall is to drive prices lower against market expectations.
Buy Wall: An influx of buy orders on an Order Book for an asset which appears to be overvalued. Most of the time, the intention of a Buy Wall is to drive prices higher against market expectations.
At the end of the day, successful crypto trading is what matters. Don’t risk more than you can afford. Then again, before diving in, ensure that you have a sound understanding of what you are getting into. If possible, start with a demo account, acquaint yourself with these terms and above all, don’t stop learning.