Educational Post
Basic Crypto Terminology & Basic Concepts
Crypto Trading Terminology & Concepts
1 Bitcoin = 100 million satoshis (1.00000000 BTC)
What is a Satoshi? The satoshi to bitcoin ratio is 100 million satoshis to one bitcoin.
Exchange: A platform that connects buyers and sellers. Users can buy and sell available cryptocurrencies on the exchange. The top exchanges for trading are Binance, BitMex, and Kucoin.
FOMO: Fear of missing out. This happens when a coin is rapidly rising in value and people buy it without research, hoping to make quick profits or not to be left behind.
FUD: Fear, uncertainty, and doubt. Investors or traders are unsure about the next movement of the coin and sell at market price, causing panic and heavy selloff.
Total supply: The total number of coins that will ever exist. The total supply of Bitcoin is 21 million.
Circulating supply: The number of coins in circulation, or the number of coins that have already been mined.
Bull market: A market in which prices are rising. The coin is making higher highs in a given time frame. Bull markets can depend on time frames. If you look at the BTC chart from 2010 to 2020, you will see many bull markets on the chart.
Bear market: A market in which prices are falling. The coin is making lower lows in the given time frame.
Note: A bull market can have many bearish cycles and vice versa, as shown in the chart.
CMP: Current market price.
Market cap: The product of the current price and circulating supply.
Bubble: A market that is increasing without any technical or fundamental basis. The market continues to increase regardless of market conditions and sentiments. The best example of a bubble market is Tulip Mania.
Bots: Trading bots that trade continuously according to their setups.
Swing trading: Swing traders buy and sell a coin on a daily or weekly time frame. Swing traders do not hold positions for long.
Positional trading: Positional traders wait for the best entry and hold trades for weeks or months to maximize profits.
Day trading: Day traders complete trades daily. They close all positions at the end of the day, regardless of profit or loss.
CPI: Consumer price index.
FOMC: Federal Open Market Committee.
Leverage: Some exchanges allow users to buy or sell more coins than they have. This is possible through leverage. For example, many exchanges such as Binance, Kucoin, OKX, and By bit offer leverage trading. The exchanges allow users to borrow extra money from the exchange and trade with it. You can open a position of $2000 with just $200 by using 10x leverage. Leverage may vary by exchange and coin.
Margin: The total amount of funds required to open a leveraged trade. If the margin value drops below the position value, the position will be closed. For example, if you want to open a $2000 trade with 5x leverage, the margin required will be $400. $400 * 5 = $2000
Long position: Buying assets with leverage. Profit and loss depend on the leverage taken. If the leverage taken is 5x and the spot price moves up 10%, the total profit on a long position is 50% minus exchange fees.
Short position: The opposite of a long position. If you think the price of the coin will go down in the coming days or weeks, you can open a short position with leverage.
Bag holder: A trader holding a large position in a coin for a long time.
Volatility: "Volatility" is the percentage change in the price of an asset. Traders check the daily volatility of a coin before opening a short or long position.
"ROE" is the acronym for Return-on-Equity. It is calculated by the actual margin used in a position.
"Altcoin" refers to all coins except Bitcoin, which are known as altcoins or Alts.
A "Whale" is a person who has a large amount of a given coin.
A "Bull trap" is when the price of a coin suddenly increases and retail traders start buying it. However, the price then falls after a fake out on the chart, resulting in many long positions being liquidated.
A "Bear trap" is the opposite of a bull trap.
"Ask" and "Bid" refer to sell and buy orders, respectively.
"Spread" is the difference between the buy and sell orders. Exchanges with high volume typically have low spreads and vice versa.
"Support" and "resistance" refer to a price level where the price of a coin has bounced back multiple times (support) or has retraced from (resistance).
"Walls" are large orders at a specific price. There are both buy and sell walls.
"Stop-loss" is the price at which traders want to cut their losses. For example, if a coin is bought at 100 with a stop-loss at 90, the position will be closed if the price drops 10%. Stop- loss is an important tool for managing risk in trading.
"Liquidity" is a measure of how actively a coin is traded on an exchange. High liquidity means there are more buyers and sellers on the exchange and that the spreads will be low and orders will be filled easily.
An "uptrend" is when the price of a coin makes higher highs and higher lows in a given time frame.
A "downtrend" is the opposite of an uptrend, where the price makes lower highs and lower lows.
"Consolidation" refers to a price range where the price of a coin will trade after a rally or sell-off. The market will be volatile after breaking out of the consolidation zone.
A "correction" is a fall in price after making a new peak or an upwards rally. In the cryptocurrency market, corrections often result in a 20-30% drop in price after reaching an all-time high.
"Sell-off" occurs when traders start to book profits after a rally, leading to a decrease in the price of the coin.
"Rally" refers to an immediate increase in the price of a coin.
"Pattern" refers to a predefined shape on a chart that has been historically studied by technicians. Traders use these patterns to try to predict future price movements.
A "Limit order" is an order that will only execute at a predefined price if the market reaches that price.
A "Market order" is an order to buy or sell at the current price level, executed immediately.
"Time period" or "time frame" refers to the difference between the formation of candles on a chart. Common time periods include 5 min, 15 min, 30 min, 1 hour, 4 hour, daily, weekly, and monthly.
"ATH" stands for all-time high prices.
"Average down" refers to the practice of trying to lower the average entry cost of a position by slowly buying the asset at decreasing rates.
"Initial Coin Offering (ICO)" is a type of crowdfunding using cryptocurrencies to raise capital for early
"Liquidation is a condition in which positions are closed because there is not enough margin available in the account.
Arbitrage is a trading method that involves buying coins from an exchange with a low price and selling them on another exchange with a high price. For example, if Bitcoin is trading at
$5000 on Binance and $5000 on Bitfinex, traders may buy on Binance and sell on Bitfinex.
Websites for Chart Analysis
There are many websites that offer cryptocurrency charts. Trading view is one of the best websites for chart reading and analysis, as it offers a wide range of tools and indicators for chart analysis. Coinmarketcap and Coingecko also provide charts for cryptocurrencies, but do not have as many tools and indicators available for analysis.
Pump-and-dump refers to a situation in which the price of a cryptocurrency is suddenly increased by a group promoting the coin, followed by a sudden decrease in price due to negative news or heavy selling.
