Are you a newbie in the crypto world? Either you are in the stock market or day trading Forex, you must have heard a lot of trading terms that seem unfamiliar to you.
FOMO, ROI, ATH, HODL, wondering what it all means? Trading and investment have their language, and it can be intimidating to learn all these new terms. They, however, are of great benefit to you if you want to be up to date in current crypto and financial markets.
In this article, we've accumulated some of the essential trading terms you should know if you're a crypto-trader or aspiring to be one.
It is a frequently used expression in the crypto community. It stands for fear, uncertainty, and doubt because it imitates feelings in the market, especially when there is a big price alteration. This term applies to any situation in which fear can get in the way of trading.
FUD is very common in the cryptocurrency market. It can cause the price of a coin to fall, not because of the charts, but based on the bad news that spreads around the social media networks. The fear and doubt-inducing idea being carried all over social media can be referred to as FUD.
Short form for 'fear of missing out'. The all-consuming fear of missing out on something that other people are enjoying. Do you know that feeling? When you see a substantial green percentage growth on a chart, and you don't own that coin, so you start freaking out?
As crypto trading is still very much determined by sentiments rather than assessment, FOMO is a huge factor to look into when swing trading in crypto. FOMO can influence you to buy into a crypto coin, not take profits on a crypto coin, or not set a target or stops on a crypto coin that has gone up considerably. People can be said to get FOMO when they act on a driving power due to the fear of missing out.
There is one bit of advice I can give you: don't enter trades based on fear. Say no to FOMO, but please consider the effects of FUD.
It will interest you to know that HODL is a term coined from a misspelling of "hold" that refers to buy-and-hold strategies from the perspective of bitcoin and other cryptocurrencies.
HODL is sometimes explained as an acronym standing for "hold on for dear life" or some difference. A trader who buys a crypto coin and does not have plans on selling in the near future can be referred to as a holder of the coin.
HODL was later modified to be an acronym (backronym) for "Hold On for Dear Life" and refers to not selling, even during strong market instability and poor market performance.
BUIDL is a changing of the word "build" in the same style as "HODL." BUIDL is a call to arms for building and contributing to the blockchain and cryptocurrency ecosystem, instead of inactively holding. The main idea is that the true believer of the crypto industry proceeds in the building of the ecosystem not minding the cruel bear markets. In this sense, "BUIDLers" truly care about what benefits Blockchain and cryptocurrencies can bring to the world, and they are enthusiastically working towards this goal. Those who BUIDL seems to be enjoying it and look happier since builders don't have the time to day trade or buy dodgy coins. Builders also understand that the teams that keep building with a long-term mindset will likely do well over the long-run.
ROI, which means Return on Investment, is a way to calculate an investment's performance. ROI measures the returns of an investment compared to the original cost. It's another convenient way to compare the performance of diverse investments.
So, to calculate ROI, you minus the original cost of investment from the current value of an investment. After that, you then divide that number by the initial price.
ROI= current value (CV) – Original cost (OC)/Original cost
Imagine you buying bitcoin at $20,000 and the current market price of Bitcoin is now $25,000.
ROI = 25000-20,000/20,000
Therefore, ROI= 0.25
The above illustrations show that you're 0.25% up from your original investment. It's also worth taking into account the interest rate that you have to pay to get a more exact image.
Unprocessed numbers aren't the whole picture, however. When comparing investments, other factors are also to be considered. Asking questions like; what are the risks? What is the time horizon? How liquid is the asset? Can slippage affect your purchase price? ROI isn't the vital metric by itself, but it's a useful tool to measure your investments' performance.
Basically, ATH stands for the All-Time High of a coin or token in the crypto market. It is obtained when a cryptocurrency exceeds its prior ultimate price, discovering new support at a higher level.
It's important to note that the cryptocurrency market goes round in circles. There are the bull and bear markets, of which both play an essential part in a crypto coin's growth. In order to reach an All-Time High, a coin should see itself in a bull market, so as to ensure that the demand is high enough to maintain its price going upwards.
Crypto Anti-money Laundering (AML) is a complex framework of rules, and regulations to battle money laundering. AML permits exchanges to grow expenses by safely involving in cryptocurrency transactions to maintain a little risk profile.
AML regulations require the submission of risk reports, the performance of diligence processes before accepting new customers and reporting suspicious activities. Failure to adhere to the rules of AML attracts severe penalties.
Know-Your-Customer (KYC) can be referred to as a process that only identifies and authenticates customers based on their recognized risk profile. It is basically a process that aids in verifying the real identities of customers.
ATL means "all-time low", as in "all-time price low." It is the reverse of ATH. In the perspective of cryptocurrencies, it refers to the lowest price milestone that any given coin or token has ever accomplished. Breaking an All-Time Low on an asset can lead to the same effect as when breaking the All-Time High but in the opposite direction. Many stop orders may generate when the previous All-Time Low is damaged, which may result in a sharp move down.
Since the price history below the previous All-Time Low does not exist, the market value can just keep decreasing, going lower and lower. Since there aren't undoubtedly logical points for it to stop, purchasing during times like this is very dangerous.
The acronym "SAFU" came to stand for "Secure Asset Fund for Users". This means an emergency reserve is put in place to safeguard any invested assets. This money most times are used to pay back investors in the event of a hack or other event resulting in the loss of user assets.
Investing safely entails thorough research. Not just the research that involves doing what a popular blockchain influencer guides you to do. Learn as much as you can about the company that you are investing in. This includes information about who their management team is and how the company makes sure that you are making a safe investment. While the Hedge Trade platform allows other investors to make recommendations, it is your money that you are investing in. Prepare yourself to accept the dangers connected with your investment choices. Therefore, we recommend you know first-hand just what you are getting yourself into.
Cryptocurrency trading terms can seem a bit complex at first. But now you know a fair amount of them. The above article has shown some of the most general terms you can usually find when it comes to cryptocurrencies, and some of these terms are used without users knowing the meaning.
We hope we have been able to add to your knowledge and we wish you wish in your crypto trading!