Nowadays, more and more people are paying attention to the cryptocurrency circle, but there are few people who really understand the cryptocurrency circle. Newbies don’t know where to start. Today, I will share with the newbies some basic knowledge about the cryptocurrency circle.
1. What is cryptocurrency trading?
In this article, we will first talk about cryptocurrency speculation. In fact, cryptocurrency speculation is similar to stock speculation, real estate speculation, and foreign exchange speculation. All of them make profits by buying at a low price and selling at a high price.
For example, if you think that housing prices are going to rise, you can buy a house immediately, and when it has risen to a certain level, you can sell it and make a fortune. The difference is that cryptocurrency trading has a freer trading mechanism (trading stops 24 hours a day) and a larger profit margin (no fluctuation), making cryptocurrency an investment with a much higher return on investment than traditional stock markets, futures markets, funds, real estate, etc.
2. What is an exchange?
An exchange is a platform for trading digital currencies. The three most commonly used exchanges now are Huobi, Anbi, and OK.
There are many other small exchanges, just like there are four major banks and various other banks. Using the top-ranked exchanges has a much higher security factor and you can trade with confidence. Some currencies can only be purchased at individual special exchanges.
3. What is USDT?
Exchanges are places where digital currencies such as Bitcoin are traded. Trading digital currencies requires a currency, also called a stable currency, namely USDT. This is also the most commonly used legal currency.
USDT is called Tether, a virtual currency that links cryptocurrency to the legal currency of the U.S. dollar. It is a virtual currency stored in a foreign exchange reserve account and backed by legal currency. You can simply understand it as Chinese.
Tether (USDT) is a token Tether USD (hereinafter referred to as USDT) based on the stable value currency US dollar (USD) launched by Tether. 1 USDT = 1 USD.
The exchange itself cannot directly sell or buy virtual currency, nor can it sell you USDT, and you and the exchange cannot buy it. If you want to buy currency, you need to first buy USDT with RMB, and then use USDT to exchange the digital currency you want to buy. If you want to sell currency, you need to exchange your digital currency into USDT and then sell it for RMB. After you have USDT, you can exchange it for any digital currency on the exchange, which is called currency-to-currency trading.
4. Basic terminology for playing with coins
Position: refers to the ratio of an investor's actual investment to the actual investment funds.
Full position: Use all funds to buy virtual currency.
Lightening up: Selling some of the virtual currency, but not all of it.
Heavy positions: Compared with funds and virtual currencies, virtual currencies contribute more.
Light position: Compared with funds and virtual currency, funds contribute more.
Short position: All virtual currencies held in the part are sold and converted into funds.
Stop profit: After obtaining a certain amount of profit, the virtual currency held will be sold to keep the profit.
Stop loss: When the loss reaches a certain level, the virtual currency held will be sold to prevent the loss from further expanding.
Bull Market: Prices continue to rise and the outlook is optimistic.
Bear market: Prices continue to fall and the outlook is bleak.
Long position (going long): attack, believing that the currency price will rise in the future, buy the currency price, and after the currency price rises, sell it at a high price to realize profit.
Short position (short selling): The seller believes that the price of the currency will fall in the future, so he sells part of the currency he holds (or borrows currency from the trading platform), locks the position and waits for the price to fall to a certain level before realizing the profit, which can also avoid risks.
Open a position: buy virtual currency.
Covering a position: Buy virtual currency in batches, such as buying 1 BTC first, and then buying another 1 BTC.
Rebound: When the price of a currency falls, the price rebounds due to the rapid decline.
Consolidation (sideways): The price fluctuation range is reduced and the currency price is stable.
Negative decline: The price of the currency decreases slowly.
Diving (waterfall): The price of the currency drops rapidly and the amplitude is large.
Selling at a loss: After buying virtual currency, the price of the currency falls, and the virtual currency is sold at a loss to avoid further losses. Or after borrowing currency to short, the price of the currency rises, and the virtual currency is bought at a loss.
Being trapped: The price of a currency is expected to rise, but unexpectedly it falls after buying; or the price of a currency falls, but unexpectedly it rises after selling.
Unwinding: After buying virtual currency, the price of the currency drops, resulting in a temporary book loss, but then the price of the currency rebounds and the loss turns into profit.
Missing out on opportunities: After selling virtual currency due to pessimism about the future market, the price of the currency continued to rise, and you failed to buy it in time, so you failed to make a profit.
Overbought: The coin price continues to rise to a certain height, the offensive force is basically exhausted, and the coin price is about to fall.
Oversold: The price of the currency continues to fall to a certain low point, the selling power is basically exhausted, and the price of the currency is about to rise.
Lure more buyers: The currency price has been consolidating for a long time, and the possibility of decline is increasing. Most of the short sellers have sold the virtual currency. Suddenly, the short sellers push up the currency price, inducing the long sellers to think that the currency price will rise, and they buy in one after another. As a result, the short sellers suppress the currency price, trapping the long sellers.
Luring short sellers: After long sellers buy virtual currency, they deliberately suppress the price of the currency, causing short sellers to think that the price will fall and sell out in droves, thus falling into the trap of long sellers.
5. What are mainstream digital currencies?
Mainstream currencies are value currencies. Bitcoin is the leader and Ethereum is the second. Some people believe that only these two are mainstream digital currencies, some people believe that only the top ten digital currencies by market value on exchanges are considered mainstream digital currencies, and some people believe that only those that are continuously listed on mainstream exchanges are considered mainstream digital currencies.
Taking Feixiaohao as an example, we can see the market value ranking of related currencies. Mainstream currencies rank high, such as Bitcoin, which is the focus of attention.
Generally speaking, currencies with higher market capitalization rankings have high market recognition, good liquidity, and higher investment value; conversely, currencies with lower market capitalization rankings have low recognition, poor liquidity, and correspondingly higher investment risks, and users are advised to buy.
6. Risks of Cryptocurrency Speculation
The most pertinent advice on cryptocurrency investment may come from Ethereum founder Vitalik Buterin: Don't invest any money you can't afford to lose. Once again, I would like to remind all newbies to act within their means. It is recommended not to borrow money, take out loans, mortgage, or use credit cards to participate in such investments, especially playing with contracts.
7. Contract Gameplay
Coin-to-coin trading belongs to spot trading. If you want to make money in an upward or downward market, you have to do contract trading. Contract trading, as opposed to coin-to-coin trading, belongs to futures trading. The subject matter of these transactions is standardized contracts.
You can recover a certain percentage of the margin and borrow a portion of the digital currency. If the market outlook is bullish, you can choose to go long, and if the market outlook is bearish, you can go short. You can also conduct directional transactions, open both long and short positions, and hedge risks. Therefore, you can make money through contract trading regardless of whether the market is rising or falling, which greatly improves the utilization rate of funds.
The margin penalty ratio here corresponds to different leverages. For example, if you judge that BTC is bearish in the future, you want to open a short order of 100 BTC. The minimum margin of 1% of the penalty is equal to 1 BTC, and you can borrow 100 BTC, which is 100 times leverage. It is equivalent to leveraging the income of 100 BTC with the funds of 1 BTC. After borrowing, you sell it immediately and wait for the price to fall. Assuming that BTC falls from 35,000 US dollars to 34,000 US dollars, you immediately buy back 100 BTC and return it to the platform. You will get (35,000-34,000) * 100 = 100,000 US dollars in income. If you do not use contract trading, you cannot profit from this wave of decline. If you do not add 100 times leverage, you cannot get 100 times the income. This is the contract.
Newbies should not play with contracts! Newbies should not play with contracts! Newbies should not play with contracts! Important things should be said three times! Contracts seem to be the fastest way to get rich, but the form is the shortest way. The "fast" mentioned here is more often the fastest way to blow up the account and go bankrupt, rather than the fastest way to wealth and freedom.
8. Three Essential Elements for Cryptocurrency Trading
1. An Android phone. (Android is more convenient, Apple's certificate is easy to lose) Android phones are also necessary for playing projects.
2. Spare money: Money that you don’t need urgently in the near future, and even if you lose it, it won’t affect your quality of life.
3. Mindset: Cryptocurrency trading is risky, so people who are worried about gains and losses should not participate.
There is more to making money in the cryptocurrency world than just speculating on it. There are so many paths to explore, and the return is always proportional to the investment. I hope you and I can gain something from the cryptocurrency world.
