Beginner traders often experience difficulties associated with a lack of understanding of certain specific terms that are widely used in investing, trading on the exchange, and working with cryptocurrencies. In order to eliminate misunderstandings and help beginners communicate in the same language with professionals, this article has been written. Here a brief overview of the main terms which are given in alphabetical order.
Algorithmic trading is a type of exchange operations that is implemented using robots - programs written specifically for the purchase / sale of financial assets. Algo traders are those market participants who use such robots in practice. The advantages of robots are in the fact that traders save themselves from the risk of human errors. Also this type of trading allow you to evaluate the effectiveness of the strategy with higher accuracy and speed.
Altcoin is a cryptocurrency that is an alternative to bitcoin. In fact, none of the many cryptocurrencies could surpass Bitcoin in capitalization, popularity, or at least repeat its success. Therefore, the most successful pursuers of the main cryptocurrency are referred to collective term “altcoins”.
Up-bar, Up-trend - in the vocabulary of exchange traders, the prefix “Up-” means that we are talking about raising prices.
Arbitration is an approach to profit from operations in financial markets associated with the simultaneous operation on several exchanges. Arbitrage trading involves buying an asset on one exchange and selling it on another exchange. This is justified by the fact that sometimes there are times when the same financial asset is traded on different exchanges at different prices; and due to this, arbitrageurs get a profit.
Ask - Selling price. Imagine a market in which there are many sellers; each of them wants to sell their financial asset as expensive as possible. Sellers send orders to the exchange, indicating the price at which they are ready to sell their asset. These are Ask prices. The lowest Ask price is the best offer price. If you give a market buying order, your order will be executed at the Ask price.
Bar is a graphic element. Each bar displays the price action for a chosen time period. The bar consists of a vertical line and horizontal marks that contain information about the opening, maximum, minimum, and closing prices for the period. The bar chart has a hundred-year history, the bars were unconditionally popular among Western traders, until they received Japanese candles.
Buy means make a purchase.
Breakeven level. This is a price level at which an open position cannot bring loss. As a rule, when a position starts to make a profit, traders place a stop-loss order in the breakeven zone, thereby guaranteeing themselves no negative result.
Bitcoin (BTC). Usually, this term means the main cryptocurrency. However, bitcoin can also be called a network of electronic payments, in which the cryptocurrency of the same name operates. The first feature of Bitcoin is that this means of payment operates on the basis of a decentralized network, that is, all participants in the network are equal, and the main server or administrator, as a control element, is absent and cannot be created. The second , the total number of bitcoins is limited, in order to get bitcoin, you need to make many complex calculations. Third, cryptographic encryption methods are used in the functioning of the network; but all transactions are available in an open database. Also, all protocols that operate bitcoin are stored in open access. The first bitcoins were generated in January 2009.
Blockchain. For the first time this term appeared in October 2008, as the name of a database that was implemented in the Bitcoin electronic payment system; therefore, the blockchain is often associated with cryptocurrency transactions. However, to be more precise, the blockchain is a more universal technology and can be used not only in electronic finance; a blockchain is a chain of blocks, where each block contains certain information and is associated with other blocks. Copies of the chain are stored on various computers, so editing information stored using blockchain technology is extremely difficult. This makes this technology very reliable in modern digital world.
Bull. This is a figurative term for positive market expectations. It is believed that this term refers to the shock movement of the bull, which with its horns throws the victim up. Therefore, when traders say “bull market” - this means that the market is going up. The bull is the buyer. If they say “bullish bar” - this means a bar that has closed at maximum. Accordingly, a “bullish trend” is a directional upward movement of prices.
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security.
Gap. This is a phenomenon when the opening price of the next period is significantly different from the closing price of the previous period. It is most pronounced on the daily charts of tokenized stocks, because the underlying markets for these assets operate with long breaks at night, and when the next session opens, the price already takes into account new factors that appeared after the close of the previous session. If the market does not close at night (as is the case with cryptocurrencies), then in such markets a gap is very unlikely, and it can occur in cases of high volatility.
Down bar, downtrend. Words with this prefix imply a negative trend in the market, a down trend, for example, means a steady decline in prices. Down channel is a downward corridor on the price chart.
Divergence in cryptocurrency trading is the separation of two lines or paths. Lines feature prominently in crypto trading and are seen on charts and multiple indicators, making divergence a common sight.
Diversification is a method that is used to reduce risks during an investment. By diversifying their assets, investors sort of “lay eggs in different baskets”, and distribute capital between different assets. For example, an investor has invested in several cryptocurrencies. If even one cryptocurrency falls in price, then growth in the other two will allow the portfolio to show profit.
Long position is an open purchase transaction (long).
Protective orders are orders that the trader gives to the exchange to protect their positions. More specifically, protective orders are limit orders that prevent the trader’s capital from losing and limit its possible losses to the level of allowable ones.
Investments are operations with securities that are aimed at preserving and increasing capital. Typically, investments refer to the purchase of securities in cryptocurrency, stock and related markets. For example, investing in tokenized stocks. Investments are characterized by a long term, usually investors hold their positions for one year, several years or even more.
Insiders are people who possess non-public information that has an impact on price dynamics. For example, insider (internal) information may be statistics that have not yet been published.
Intraday means "within the day." In the financial world, the term is shorthand used to describe securities that trade on the markets during regular business hours. These securities include stocks and exchange-traded funds (ETFs). Intraday also signifies the highs and lows that the asset crossed throughout the day. Intraday price movements are particularly significant to short-term or day traders looking to make multiple trades over the course of a single trading session. These busy traders will settle all their positions when the market closes.
Index. Each crypto index is made up of a selection of cryptocurrencies, grouped together and weighted by market capitalisation (market cap).
Indicator. This indicator shows price correlations of your current chart to various well-known indices.
Channel is a limited price range. The channel can be both upward and downward, as well as lateral. A channel trading strategy involves buying an asset from the lower border in order to sell it near the upper border.
Consolidation is a technical analysis term referring to security prices oscillating within a corridor and is generally interpreted as market indecisiveness.
Short Position is an open deal for sale.
Correction is a directional price movement that occurs after a strong trend movement. For example, a downward correction after a period of price increases implies that the market has experienced overbought conditions and a downward price correction should bring current quotes closer to the real intrinsic value of the asset.
Cryptocurrency is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a digital ledger or computerized database using strong cryptography to secure transaction record entries, to control the creation of additional digital coin records, and to verify the transfer of coin ownership.
Liquidity. One way of defining liquidity is the ability of an asset to be converted to cash on demand. Another view is that liquidity is determined by the bid-ask spread, and an investment with a lower bid-ask spread has higher liquidity.
A limit order is a type of order to purchase or sell a security at a specified price or better. For buy limit orders, the order will be executed only at the limit price or a lower one, while for sell limit orders, the order will be executed only at the limit price or a higher one.
Line is a geometric segment on the chart, it is usually drawn through local extremes of the price and serves to build channels or figures of technical analysis. The trend line helps traders assess the presence of directional price movement and find entry points to a position by trend.
Long.This is an open buy position. When traders say “stand in long” or “open long” or “open long position” - it all means “buy”, “enter into purchases”.
Loss - lession.
Low - minimum price (bottom, lowland) for a certain period of time.
Mining is the process of “mining” cryptocurrency, in which complex calculations are performed.
Margin lending is a type of loan that allows you to borrow money to invest, by using your existing shares, managed funds and/or cash as security. It is a type of gearing, which is borrowing money to invest.
Market order is a buy or sell order to be executed immediately at the current market prices. As long as there are willing sellers and buyers, market orders are filled. Market orders are used when certainty of execution is a priority over the price of execution. A market order is the simplest of the order types.
A bear market in crypto is a situation when the price of coins goes down and other traders reinforce this trend by actively selling the currency. In this way, a stable downtrend is formed
Coin - collective name, unit of cryptocurrency. A coin can be Bitcoin, Ethereum, or another cryptocurrency.
An oscillator is a tool for technical analysis which varies over time within a certain band . The oscillator built in this article is built primarily for bitcoin and takes as input bitcoin's price history.
An order is an instruction that a trader sends to the exchange; he expresses the consent of the trader to complete the exchange operation. Orders may be limited, stop orders or market orders. The type of order depends on the way it will be executed. After the order is sent to the exchange, it can be canceled in a number of cases.
Rollback is a slight decrease in price after a period of growth. Typically, a downtrend occurs during an uptrend. In principle, a rollback is the same as a correction. They describe the decrease in volatility that a trader sees on the chart.
To open a position is to enter the market, close a deal, invest in an asset. If you have a position in the market, this means that you own any financial assets.
Pattern - in the technical analysis environment, the term “pattern” is used in cases where the price forms a repeating pattern in its behavior. Technical analysts distinguish many patterns, such as “flag”, “head and shoulders”, “wedge”, “butterfly” and other patterns.
Overbought and oversold conditions are signs of a market condition in which a quote goes too far from the fair intrinsic value of an asset.
Leverage is a fairly simple concept – instead of putting up the full market value of an asset such as Bitcoin, the trader operates on 'margin' – 25:1 leverage (or 25x) means that for every dollar the trader stakes in equity, they can trade $25. This is also known as a 4% margin trade.
Support is a conditional line where technical analysts expect a slowdown in the rate of price decline or its upward reversal. This can be either a horizontal line (level) or drawn with a slight slope. Usually, local price lows are used for this, which confirm that the asset is underestimated at support levels. Trading off support levels is a classic approach for building profitable strategies.
Drawdown is a temporary decrease in the value of the position, which occurs due to a decrease in the price of securities. If the investor made the correct calculation, then the drawdown is quickly restored, and the position begins to make a profit.
Slipping is a technical nuance. It is usually caused by the time difference between the moment when the trailer sends the order to the exchange and the moment when the order reaches the exchange. As a rule, the time between sending and receiving an exchange order is calculated in fractions of a second, but during periods of active price movements this can mean the difference between the price at which the trader is counting and the price at which his order will actually be executed.
Profit is a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
Reaction. As a rule, this term means a local price decrease; it can occur, for example, within the framework of the current uptrend.
Regulation is an order of control over financial markets. It is provided by official government organizations that operate at the state level in order to ensure order and law in the financial markets. Regulatory authorities exercise strict supervision of legal entities operating in their legal field.
Risk Management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters.
Candle is a term widely used in stock trading. A candle is a separate chart element that displays data of opening, minimum, maximum and closing prices for a certain period of time. Candles came to the trading world from Japan, so they are often called Japanese candles. In addition to the function of displaying price dynamics, candles can also be used to make trading decisions. This allows you to do candle analysis. Traders highlight various candlestick patterns and enter positions when they appear on the chart. T
Swap is the cost incurred by the trader or investor in connection with the fact that his position is transferred through the night. Typically, in financial markets, swaps are used to reduce the risks of brokers that provide traders with access to exchanges.
Deal is a trading operation conducted by a trader on an exchange. For example, when a trader buys an asset, he does not acquire it from nowhere. His order is executed by a counter order of another market participant. Thus, the exchange actually deals in the purchase / sale of financial assets.
Scalping is a type of trading that is characterized by a short holding time. For example, scalpers ( traders who use scalping) hold positions for one or several minutes, sometimes even for a few seconds.
A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract.
Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some "stable" asset or basket of assets. A stablecoin can be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals).
A stop-loss order is an order placed with a broker to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%.
Strategy is a set of rules for entering, holding a position and exiting it. The strategy allows the trader to act systemically, analyze his own performance, control risks, predict and optimize his work on the stock exchange. Working without a strategy leads to spontaneous decisions, excitement and the absence of sustainable capital growth in the long term.
Tether, USDT the main stablecoin is quoted at a ratio of 1:1 to the US dollar.
Technical analysis is a means of examining and predicting price movements in the financial markets, by using historical price charts and market statistics. It is based on the idea that if a trader can identify previous market patterns, they can form a fairly accurate prediction of future price trajectories.
Trading robot is algorithm, or program for automated trading. It is created to implement financial transactions on the exchange according to the strategy described in its code. Robots can be either fully automatic or semi-automatic; they are used to minimize the effects of emotions and human errors.
A token is a unit value that exists on an existing blockchain. Tokens do not have their own blockchain but depend or exist on an existing blockchain of a cryptocurrency. Eg, Ethereum, Bitcoin etc.
Asset tokenization is the process of converting ownership rights in a particular asset into a digital token on a blockchain. These can include unique hash values which represent physical assets, financial instruments, real estate, equity, bonds, fund units, etc.
Trailing is the tactic of managing protective orders, in which the stop loss follows a changing price. Applying the Trailing-Stop the trailer manually or automatically moves its stop-loss, thereby protecting the growing profit. In this case, as soon as the price turns against the trader, his position will be closed, and the profit is fixed on the account.
Averaging is a risky money management tactic, usually used by gamblers in financial markets. The essence of averaging is to increase the bet in case of loss. If a trader has a loss after buying bitcoin, he buys even more bitcoins at a lower price, hoping that when the price goes up, the profit from the second position will block the loss from the first. Often this works, but not always.
Fiat is money that is issued by the state and serves as the currency of a particular country. Examples of fiat currencies are US dollar, British pound, Russian ruble.
Flat is a market condition in which there is no directional price movement. They also say that there is no trend. Price tends to fluctuate horizontally; Opportunities for profit in such markets are minimal.
Fundamental analysis is a scientific approach for evaluating financial markets. Fundamental analysts are specialists who collect classify, structure and process the data of state economic macroeconomic statistics, statements of companies, Central banks, industry structures. The purpose of fundamental analysis is to draw conclusions about the current state and prospects of the object of analysis - be it the cryptocurrency market, tokenized stocks or the stock market as a whole.
High is the maximum price for a certain period of time.
A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.
Short. This term refers to the sale of a financial asset. If you hear the phrase “stand in short” - this means to open a position for sale. The antonym of the concept of "long."
Extremum is high or low price.
Etherium is a universal decentralized platform for managing digital assets based on blockchain technology. Unlike other cryptocurrencies, the creators of Ethereum (where the main place is occupied by the Russian-Canadian programmer Vitalik Buterin) do not limit the role of Ethereum as a payment unit, but offer it as a means for a wider exchange or for registering transactions with tokenized assets using smart contracts, which are an important part of the ethereum platform.