Cryptocurrency Terminology You Need To Know In order to Invest with a Good Trading Plan

In the world of trading you have only two choices-follow a proper plan or fail. Any successful trader who makes consistent money in the market will tell you that without a plan you won’t be able to succeed with your trading venture.

If you are someone who wants to buy crypto coins, then the first thing that you need to do is to learn not just about the different coins that are out there, but also about the terms that are used in this industry. This is because these terms have differences that need to be understood before deciding on which coin to buy. One term that you will frequently see is “gas.”

Gas is a unit of measurement for the actual gas spent when performing certain operations within a contract. For Ethereum, Ethereum Gas refers to units of computation which are necessary for executing applications. It is not an actual fuel or energy source, so people cannot really pay for gas at a gas station or availability of gas at your local store should not affect how much it cost to perform operations with ether.

A lot of words in the cryptocurrency world are filled with different meanings.

For example, Airdrop is not what you think it is. What are the meanings of Airdrop, Scam, ICO? I’d like to compile a list of all the most important terms in Crypto and explain them for people who are new to the industry.

Cryptocurrency Terms:

Airdrop: When a blockchain project distributes coins or tokens for free to holders of some other coins or tokens on a different blockchain platform. Advantages include increasing brand awareness and attracting new users. Disadvantages include low marketing budget and large sums of left-over coins that were not on the receiving blockchain platform.

HODL.

The term “hodler” is used for a cryptocurrency trader who doesn’t plan on selling any coins anytime soon.

Lending Rate.

Some exchanges offer a lending feature where you can deposit coins to lend them to others for them to trade in the market. The interest rate changes throughout the day based on the demand for shorting the coin.

Fill or Kill.

An order that will only be executed if an opposing order is greater than this limit order’s amount.

BUY | SELL Wall.

A wall in the depth chart of the order book indicates an amalgamation of limit orders that have the same price target.

Altcoin

“Alternate Coin” means everything else but Bitcoin. Bitcoin is the primary cryptocurrency, and everything else goes up and down with it.

Circulating Supply.

It is meaningless for a coin to have a price on its own, but when multiplied by the circulating supply of coins, the coin’s market cap can be determined.

Market Cap.

A stock’s market cap refers to the market value of a company’s outstanding shares.

In the cryptocurrency market, the market cap of a coin is used to show how dominant it is in the entire market.

DDOS.

Distributed denial of service attack (DDOS).

In the event of a sudden and large market movement, it may be disastrous for traders to not be able to execute any orders manually and be at the mercy of their pre-set or lack of, limit orders.

FOMO.

FOMO (Fear of Missing Out) is a short form for the phrase, “feeling of missing out.” The fear that comes with not owning the coin that you’re seeing on the chart. The coin is so amazing, that you must jump on it before everyone else does.

FUD.

In brief, FUD (fear, uncertainty and doubt) refers to how people talk about the effects of technological innovation.

ATH.

The expression “All-Time High” is short for “All-Time Price”, so it means the highest historical price of a coin.

Whale.

A big whale that has a lot of money, often moving smaller alt-coins ..and buying and selling in bulks

Pump and Dump.

An altcoin (or alternative cryptocurrency) rises and falls in value because the supply is finite, meaning that the supply can’t keep up with demand. People who buy altcoins and attempt to manipulate the price through pump and dump schemes can generate a lot of profit. These traders are known as FOMO (Fear Of Missing Out).

Shill.

The act of unsolicited public endorsement of a certain coin. Traders who purchase a certain coin might have an interest in creating the public’s desire to possess that coin.

Bag Holder.

The person who bought at a high price and missed out on selling his/her coin later.

Margin Trading.

It’s a method of trading that involves borrowing one side of a financial product and selling it for the other side of the same financial product. The lender is paid an interest rate for borrowing the money. Based on the market’s direction, the trader can place a long or a short position on the market of concern.

Long.

A position taken by a trader. It means believing that the value of an asset will rise in the future.

Short.

An investment strategy where a trader takes a short position on a currency. Shorting means that he believes its value will fall.

Limit Order.

A sell order placed at a future price, where the target is the current price.

Borrowing Rate.

You can calculate the overall profit and loss for a leveraged position by adding a coin value at the rate at which you borrow to a position’s total return.

Make sure you know these terms before investing in the crypto world.There are other additional terminologies related to chart reading , which are more related to the software features of the chart monitoring software for crypto , somehow ,it is quite necessary to know some of thses terms as they are also co-related and well interpreted by most traders in the field, but in order not to confused readers we will discuss those in another article . alternative readers can visit coinmarketcap.com for their glossary page

Invest with a Good Trading Plan

If you have already prepared a good trading plan, you are off to a good start for success.

Having a plan doesn’t guarantee you the success roadmap, however, it does get over a lot of hurdles. If your plan comes with shortcomings or lacks adequate preparation, it will take you a while to start seeing the real success from trading.

When you have a plan available on the table, it gives you something to work on or modify. Documenting your trading process won’t stop you from making mistakes but it will surely keep you from repeating the same mistakes.

This article tells you about the steps involved in creating a successful trading plan, minimum , a trader need to know the terminology as explain above .

Avoiding Disaster:

If you want to have successful trading on a regular basis, you must treat trading as a regular business. Successful businesses always have their plan ready. There are people who boasts about following seat-of-the-pants theory, but most of them don’t know how they got there. Reading a few trading books, learning few things about trading market, and opening a brokerage account could only lead you to the path of failure.There are also quite limited books on trading on Crypto ,except very much on blockchain and bitcoinming , all other rest will very much depend on market tips in order to follow which crypto is built under which project and backup or fianced by viable party for a distinctive application .

Trading market is a dynamic one as it has the potential to pause or reverse. When you know either will occur, you will be able to act in a right manner. This is exactly where having a concrete plan is important.

Know How to Build A Master Trading Plan:

Maintaining a Trading Journal

This is one of the most common mistakes traders make. They don’t understand the trade they took and try to analyze them after the fact. This only helps them answer questions such as: Why did I take this trade? What should I have done instead? How will I improve my trading

Why specific trades are giving excellent results?

Why you are losing some trades?

It will help you to improve your trading strategy over time.

Skills assessment:

This is the stage where you determine if you have examined your system, have confidence that it will work, and you are ready to start trading.

Fundamental Analysis

A lot of beginning traders start by buying a popular cryptocurrency, and are quick to trade in it. This often leads to a few big losses, which turn portfolios red for a long time.

To avoid this rookie mistake when trading cryptocurrencies, perform a fundamental analysis of the coins you wish to trade.

Learn about:

What does this coin do?

Future outlook of the Cryptocurrency

The management team

Token economy

Whats it’s project and application ..what’s it magnitude

Based on these parameters, create a list of tokens that you would like to trade. Always remember, trading is unique for everyone for which you must build your system.

Mental Preparation:

Trading is complete mental game. It requires you to be alert and attentive to the trading tasks before you. You don’t want to risk a big loss when you are not ready to face the market emotionally or mentally.

Pump / Dump and scam

There are scam groups where people buy/sell crypto. But are they effective?

Hell no!

Especially as a beginner, you’re best off avoiding pump and dump schemes.

Such groups are impractical. When thousands of users are acting on the same trade, the chances of those “signals” working is low to none.

However, the smart money has already taken its profits and now the beginner traders’ money is at stake.

Although it may work for small groups of people who are skilled in trading, it can work for any individual that has the basic trading skills to take advantage of it.

Technical analysis is based on the idea that certain events, like the closing of a stock price, are predictable. In the past, the majority of traders lost money trading based on technical analysis. However, some people have made money from it

Set your risk level and also your mental acceptance level

Before you finally start trading you should determine how much of your portfolio you would want to risk. Risk between 0.1% to 3.5% for every position is the safe one but anything above could strike with serious disaster. You should stick to the same risk level if you want to continue trading on another day.

Set Your Trading Goals:

Part of your trading plan should include setting a practical profit goal and risk-to-reward ratios. What is your expectation in terms of risk and rewards? Some traders do not even accept the trade unless the profit has the potential of being at least 3 to 10 times higher than the risk.

Before you get your hands on real-life trading, you should select a good exchange and usually they will provide training manual on their portal , on how to use their provided service properly . It is not always necessary to sign up with the big exchange like Binance or Crypto.com as there are many available . It will help you know the system properly so that you can do real trading efficiently.

Revenge Trade

In trading, losses are inevitable.

Some users don’t have the stomach for taking losses and instead enter the market in revenge trades. These trades are usually done in fear and frustration and can be very risky for the trader’s career.

After losing some trades, you must be mindful of how you play the market. Although no trader can win 100 percent of their trades, it’s possible to earn profits that keep your portfolio positive.

Calculating Risk Reward

But how much profit are you willing to make? How much loss are you willing to accept?

In short, this is the risk-reward ratio.

To maximise your reward per risk, you should aim to make a profit of at least USD 100 (reward) per risk.

You should have the following:

50:150 = 1:3 (Risk reward ratio)

Advanced traders usually recommend a 1:3 or 1:6 risk-reward ratio.

Both ways of investing provide an easy to understand method for you to know how to avoid losing your money. Even if you lose multiple trades in a row, your overall portfolio will not be affected in the long run.

Trading Multiple Pairs

When trading multiple pairs, initially, it’s best to stick to one pair, even when you start winning. If you stay consistent, eventually you will be able to see profits.

To see the benefits of staying with a single pair for the initial 10 trades, you need to trade like it is a marathon, not a sprint. The initial 10 trades give you the opportunity to hone your trading skills rather than trading like there is no tomorrow. Increase your stake once you have more gains and look for reight timing

Stop following the Leader

Each person has their own trading style and style. You’ll soon learn how to get it.

It’s common for a beginner to have a herd mentality and believe that everyone trades the same way. However, it is not true. To create your style, you should start with maybe a hit and trial method, or taking expert advice.

Learn how to make a trade based on your individual style.

It’s important to avoid beginner’s trading mistakes and take time to learn the basic principles of crypto trading. If you continue to make less mistakes with each trade, you will perfect the art of trading.

If you want to learn about the crypto trading journey, you will realize that some of the mistakes listed here are actually timeless advice. Some of the advice can be adapted based on your current situation. Your goal should be to minimize losses, focus on wins, and build your own unique style.