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trading > terminology > Flashcards

terminology Flashcards

1
Q

what is an exchange in terms of crypto?

A

a marketplace which allows buying and selling of Bitcoin or other
coins. Eg.Bybit

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2
Q

what does FOMO stand for and mean

A
  • Fear Of Missing Out.
  • entering a trade without enough research in the fear of missing out
    on profits.
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3
Q

what does total supply mean?

A

The limit of coins that will ever exist. Supply limit of Bitcoin is 21 million.

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4
Q

what is a bull/bear?

A

bull is someone expecting the price to go higher.
bear is someone expecting the price to go lower.

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5
Q

what is a bull market?

A

a market where the prices are seeing a continuous uptrend leading to new highs being created. Generally happens when new investors enter the market

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6
Q

what is a bear market?

A

a period where the prices are seeing a long term down trend leading to a sell off.

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7
Q

what is ‘bubble’?

A

a situation where the prices are irrationally high as compared to the actual value of the asset. Whole of an asset could be a bubble or a market cycle could be a bubble.

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8
Q

what is ‘FUD’?

A

Fear, uncertainty and Doubt
E.g. McAfee announcing in 2018 that Binance had been hacked was a FUD

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9
Q

what is day trading?

A

taking a position in the market and either buying or selling and exiting it the same day.

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10
Q

what is swing trading?

A

this method looks for buying and selling positions in a weekly range

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11
Q

what is positional trading?

A

the aim is to buy monthly lows and hold them for days, weeks or even months. this is a longer term trading time period

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12
Q

what is leverage?

A

refers to the extra amount of asset bought or sold over your capital limit

E.g. If you buy $2000 of Bitcoin with a Capital of $1000, you have a leverage of 2x. Sites like Bitmex allow leverage as per your choice.

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13
Q

what is ‘margin’?

A

the amount of funds required to open a leveraged trade

E.g. If you want to open a position of $1000 with a leverage of 5X, your margin
requirement would be $200.
200 x 5 = $1000

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14
Q

long position meaning

A

this is a buy position with leverage

E.g. If you have $1000 as capital, you could buy $2000 worth of Bitcoin with leverage, or even more.
Both profit and loss in this case is multiplied by the leverage you take.
E.g. A 10% rise/fall in price in case of a long position with 2x leverage will lead to 20% profit or
20% loss.

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15
Q

short position meaning

A

exact opposite of long entry. you enter a short entry when you expect the prices to fall
shorting allows you to make money in a bear market
(borrow then sell higher, buy lower to return)

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16
Q

what is the meaning of volatility?

A

it is the percentage movement in a price of an asset over a period. a balanced volatile asset gives ample opportunity to short and long. traders look for predictable volatility
a very highly volatile or low volatile asset is not considered good for trading

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17
Q

what does ‘ROE’ mean

A

Return-On-Equity.
this is calculated by the actual capital employed in a trade and not through leverage

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18
Q

what does ‘OHLC’ mean?

A

Open, High, Low, and close
is a type of chart typically used to illustrate movements in the price of a financial instrument over time. Each vertical line on the chart shows the price range over one unit of time.

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19
Q

what is an Altcoin?

A

all coins except bitcoin.

20
Q

what is a bull trap?

A

a technique used by market makers to buy a huge amount suddenly which causes a spike in the price. This makes everyone else think that this is a breakout and buy.
the market makers then sell enormous amounts, pushing the prices down for everyone who bought into the trap

21
Q

what is a bear trap?

A

is the opposite of bull trap
market makers sell making prices go down and in turn make prices rise enormously as everyone else buys making the value sky rocket

22
Q

what are ask/bids?

A

sell orders are asks
buy orders are bids

23
Q

what is ‘spread’?

A

it is the difference between what the sellers are ready to sell at and what the buyers are ready to buy at
there always exists a small spread on all exchange, the higher the liquidity the lower the spread

24
Q

what is support/resistance?

A

a support is a zone/line where we can expect the price to bounce back up.
resistance is a line/zone where we can expect the price to rebound downwards.

25
Q

what are ‘walls’?

A

extremely large orders at a range
sell walls and buy walls

26
Q

what is a ‘demand zone’?

A

a zone with huge buy orders. this is determined through the heat map.

27
Q

what is ‘supply zone’?

A

a zone with huge sell orders. this is determined through the heat map

28
Q

what is the heatmap?

A

A heatmap is a two-dimensional visual representation of data using colors, where the colors all represent different values.

29
Q

what is ‘stop loss’?

A

order that is triggered when the price goes below a set point. used to cut losses.

30
Q

what is liquidity?

A

the measure of how actively the coin is being traded in the market.
a high liquidity coin/exchange has many buyers and sellers at the same time, making it easier to acquire or sell the coin at anytime

31
Q

what is an uptrend?

A

a price is said to be in an uptrend when its making higher highs and higher lows.

32
Q

what is a downtrend?

A

where the prices make lower highs and lower lows

33
Q

what is ‘consolidation’?

A

a period where the price is ranging in a well-defined region
this is a period of indecision and generally leads to volatile movement in either directions

34
Q

what is ‘correction’?

A

a correction is a fall in price after making a new peak or an upwards rally

35
Q

what is a sideways market

A

an indecisive market which isnt leading to a breakdown or a breakout and not giving any signals in either way

36
Q

what is ‘sell off’?

A

profit taking after a rally in price which leads to lowering of price of the asset

37
Q

what is a ‘rally’?

A

an upward trend leading to increased price of an asset
can happen in both bear and bull markets

38
Q

what is an ‘accumulation’?

A

the process by which one builds a position in an asset

39
Q

what is a ‘chart pattern’?

A

a chart pattern is a predefined shape that have been historically studied by technicians
traders try to use these previous performance statistics to predict future price movements

40
Q

what is a ‘fractal’?

A

a pattern of price movement which has occurred earlier and might occur again

41
Q

what is a ‘limit order’?

A

order will execute at a predefined price, if the market reaches that price
e.g you want to buy at 200 but its at 205 you set a limit order and it will buy if it drops to 200

42
Q

what is a ‘market order’?

A

an order to buy or sell at the current price in the market executed immediately

43
Q

what is a time period/time frame?

A

the time spread of each candle stick in a chart common time periods are
15 min, 30min, 1hour, 4hours, daily etc etc

44
Q

what is ‘ATH’?

A

all-time highs
highest price the asset has reached ever

45
Q

what is ‘average down’?

A

trying to lower the average entry cost of a position by slowly buying the asset at reducing rates

46
Q

what is liquidation?

A

when you are stopped out of your position because the trade went in the opposite direction and your margins are not big enough to carry the trade anymore.

47
Q

what is ‘arbitrage’?

A

a method of making profit using the pricing difference between exchanged
E.G if bitcoin is trading at 10,000 on bitstamp and 10,100 on bitfinex people will buy from bitstamp and sell on bitfinex

trading (1 decks)

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