10 Crypto Trading Terms You Should Know

To seasoned investors, cryptocurrency trading is not very different from investing in traditional stocks, apart from the extremely volatile swings! With cryptocurrency prices soaring over the past year, many newcomers are looking to dip their toes into the pool.

However, the jargon used in cryptocurrency trading can be slightly daunting for rookies, and the lack of understanding can lead to confusion and frustration. Here are 10 common terms that any cryptocurrency trader should know.

HODL

Originally a misspelling of the word “hold” on a forum post, HODL has since become the de facto motto for most traders. Historically, Bitcoin and other cryptocurrencies have often bounced back from huge crashes to record new all-time highs, but only a select few have the fortitude not to sell their holdings during the crash. Thus, the term is often used as a rallying cry to encourage newer investors not to accept their losses, and wait for the market to rebound.

Some have also used it as an acronym for the phrase “hold on for dear life,” referring to the massive price spikes and crashes associated with the world of cryptocurrency trading.

Bear market/Bearish

A market trend where prices continue to decrease for an extended period. Traders often stay away from making purchases during bear markets, as there is a significant chance of making a loss. In cryptocurrency, “weak hands” refer to individuals that sell during bear markets or crashes instead of continuing to HODL.

Bull market/Bullish

A market trend where prices continue to increase for an extended period and is the exact opposite of a bearish market. Many long-term traders and HODLers may sell some of their holdings during this time to take profits.

If prices rise sharply after an extended bear run, it can sometimes form a bull trap where investors act on a false signal to buy in anticipation of a recovery, only for prices to drop sharply shortly after.

Market order

The process of placing an order to buy or sell on an exchange at a pre-determined price. A market buy order will purchase the cheapest asset available for sale, while a market sell order will fill the most expensive buy order on the exchange.

Technical/trend analysis (TA)

This is the process of analyzing charts and historical graphs tracking price points of any cryptocurrency to predict the next market spike or crash. All-time highs, bottoms, and support and resistance levels are key points that create patterns which traders use to predict future activity. However, many believe that technical or trend analysis is largely ineffective in the highly volatile world of cryptocurrency trading.

Arbitrage

This is the act of buying an asset from one exchange to sell it on for a profit on a different exchange. For example, the price of Bitcoin and Ethereum may differ between exchanges in the United States and South Korea due to varying levels of demand. An arbitrage trader with accounts in both countries can buy cryptocurrency from one exchange, before selling it immediately on another for a quick profit.

Pump and dump

A pump refers to an inflated price movement trending upwards, while a dump is the exact opposite. Together, the phrase pump and dump refer to the cycle of an altcoin gaining exposure or attention, leading to a rapid increase in price, followed by an equally quick crash. This is caused by early investors taking large profits, which results in the price dropping rapidly as others look to capitalize on small profits or mitigate losses.

Whale

Quite simply, a whale is an individual that holds a huge amount of cryptocurrency. It is often thought that the trading activities of these individuals can affect the market, with their buy and sell orders usually large enough to trigger crashes and bull runs.

Fear, uncertainty, and doubt (FUD)

This phrase is often shortened to FUD and is used to describe negative news or speculation that is designed to spread fear among the cryptocurrency community. Often, the news is vague and doesn’t adequately address the issue in a balanced manner, with individuals or outlets focusing on the negative aspects instead of the full story. Many believe that FUD is used to drive down prices, so whales and other parties can buy large amounts of cryptocurrency at a discount.

Moon

The dream of every investor or trader. The moon refers to extreme bull runs of any cryptocurrency, often appearing as almost straight upwards line on price charts and graphs. It can also refer to a price point that was once considered unachievable by a coin or token.

For example, many investors considered the price point of US$10,000 to be the moon for Bitcoin, but the price surge towards the end of 2017 put an end to the speculation. Safe to say, no one can accurately predict the “moon” for any cryptocurrency!

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