The Beginners’ Glossary Of Most Common Crypto Trading Terminology
The beginners’ glossary of most common crypto trading terminology
When you first start trading crypto, the terminology used can leave you feeling out of your depth.
But the truth is that with a bit of research on your part, you can get a feel for the basics in no time at all – what’s more, it will improve the quality and success of your trading.
So, if you are completely new to buying and selling crypto with the express aim of making a profit, here’s a guide to some of the most basic terms.
Crypto broker
When you want to buy/sell crypto, you have two main choices: do it yourself via an exchange, or work with a crypto broker.
These are intermediaries between you and the market, and while you won’t always get the best price on your trades – you won’t be surprised to learn that most broker firms charge a commission on crypto transactions – you can access an easier, hassle-free experience.
The number of safe crypto brokers is growing all the time, although you should take the time to research them first before opening an account.
Crypto exchange
If you want to cut out a broker and go straight to market, a crypto exchange is your best route.
Sites like Binance and KuCoin (not an endorsement) will display the buy/sell prices for all the cryptocurrencies they carry, and you can buy them – your coins will be held in a secure wallet – and then sell them at such a time as you can make a profit.
You’re not actually trading with the exchange – this is just the conduit for buyers and sellers from all over the world to come together in one place.
Shorting
We’ve simplified the crypto trading process as a simple buy vs sell interaction.
But there are traders who essentially carry out their transactions in reverse – selling a coin at one price, and then later buying it back at a cheaper price if they expect a drop in value to occur.
This is known as shorting, and is a trading concept that has been used in stocks, currencies, commodities and other forms of investing for decades.
Proof of Stake
There are two distinct mechanisms that power cryptocurrency transactions, and Proof of Stake is one.
PoS, as it is sometimes known, is the method of processing these transactions and creating new blocks on the blockchain, which is effectively the foundation upon which crypto is built.
Proof of Work
Proof of work, meanwhile, is the ‘consensus’ mechanism which requires miners to add new blocks to the blockchain.
Each cryptocurrency uses either PoS and PoW, and there are advantages and drawbacks to each – understanding these mechanisms may ultimately determine which coins you prefer to trade.
Support & Resistance
If you want to become a crypto trader, the best advice you can heed is to do as much learning as you possibly can on common trading signals and tools prior to parting with a single dime.
One of the concepts you will learn about is support and resistance, which identifies a set of price points between which a coin is expected to trade.
This isn’t an exact science, and both support and resistance levels can be broken, but it can act as a useful guide to traders – as such, you should read up on the subject and understand it fully.
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