Trading Crash Course | 15 Glossary for Every Crypto Trader

2022-12-22, 07:58

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**TL;DR**

🔹 The best way to demystify crypto trading for new and prospective traders is to explain these terms that serve as building blocks for a solid knowledge of trading activities.

🔹 Too many things change in cryptocurrency trading in a matter of seconds. Unsurprisingly, cryptocurrency traders use many phrases, acronyms, and abbreviations.

🔹 Some of the terms every crypto trader should know include exchanges, OTC and P2P, KYC, and ICO, among others.

🔹 Getting familiar with all these terms is a great way to start learning about them and, ideally, building your portfolio of investments.
 
## Introduction
Crypto trading has its language, terms and phrases, some of which are legacy terms from general finance and stock trading.

The best way to demystify crypto trading for new and prospective traders is to explain these terms that serve as building blocks for a solid knowledge of trading activities. Too many things change in cryptocurrency trading in a matter of seconds. Unsurprisingly, cryptocurrency traders use many phrases, acronyms, and abbreviations. While learning all the new and emerging terms can be daunting, they can be helpful if you want to keep up with what's happening in the crypto market. Hence, let's look at 15 terms every crypto trader should know.
 
## 15 Everyday terms in crypto trading
### 1. Exchanges (CEXs and DEXs):
Cryptocurrency exchanges allow you to trade one cryptocurrency for another or fiat currency. Some exchanges function similarly to traditional stock exchanges, with buyers and sellers trading according to the current market price of a cryptocurrency. Each transaction on these trading platforms is typically charged a fee. There are two types of exchanges. The first is the exchanges run by third parties (they are "centralized" exchanges CEXs, with a middleman who can provide support and correct some issues).

Second, those that mimic traditional exchanges like UniSwap (where trading is handled using smart contracts and Automated Market-Making protocols). In general, centralized exchanges will ask for a lot of information but often allow fiat trading, whereas DEX exchanges are centralized and will not allow fiat trading but will ask for less.

### 2. OTC and P2P (Over the Counter and Peer-to-peer)
These platforms enable buyers and sellers to trade directly with one another. This type of direct trading platform does not use a fixed market price. Sellers determine their exchange rate, and buyers either find sellers through the platform or indicate the rates at which they are willing to buy, with the platform matching buyers and sellers. There are exchanges of this type that deal with substantial buyers and sellers (known as Over Counter or OTC), as well as others that deal with smaller transactions (these are called Peer-to-Peer or P2P). In some areas, this type of exchange may be the only option. In regions where trading is restricted to direct exchange, use a trusted platform and deal with highly rated users.

### 3. KYC (Know your Customer)
KYC stands for Know Your Customer (KYC) or Know Your Client. It is a set of guidelines to ensure that institutions facilitating financial instrument trading verify their customers' identities. Part of the main reason for this is to reduce the risk of money laundering.

KYC is a requirement of international anti-money laundering legislation (AML laws). KYC is intended to assist authorities in tracking down and preventing people from engaging in illegal activities such as terrorist financing or concealing money associated with criminals.

KYC, as the name implies, focuses on gathering official ID documents for prospective clients. These policies on cryptocurrency exchanges typically require customers to submit state-approved documents such as a passport or driver's license to verify their identity. The company compares this paperwork to public records to determine whether a client has a criminal history. If the company discovers that a customer has a low-risk profile, it will likely allow them to begin trading cryptocurrency.

### 4. ICO (Initial Coin Offering
An initial coin offering (ICO) is a type of fund-raising activity in the cryptocurrency world. It is the launch of a new coin, which is a type of digital asset. ICOs function more like a new stock's initial public offering (IPO). An ICO allows many venture capitalists to buy a new digital currency. Unlike traditional stock accounts, coins in an ICO are frequently manufactured and sold using blockchain technology, which is the same technology that underpins cryptocurrencies. Ethereum was made available by way of an initial coin offering (ICO) in 2014. When Ether first went online, it was worth about $0.30. 7 years later, one coin was worth more than $3,000, representing a substantial return on investment. Although it is currently selling below its all-time high due to the market downturn

### 5. ROI (Return on Investment):
Return on Investment (ROI) means evaluating an investment's performance. ROI compares the profits made on an investment to the initial investment. It's also a helpful way to compare the performance of different assets. You subtract the initial cost of the investment from its current value to calculate the ROI. The total is then divided by the initial cost.
 
Current Value - Original Cost / Original Cost = Return on Investment
 
Assume you paid $12,000.00 for [Bitcoin](https://www.gate.io/trade/BTC_USDT). On the market, [Bitcoin](https://www.gate.io/trade/BTC_USDT) is now worth about USD 18,000.
 
ROI = 18000-12000/12000
 
ROI = 0.5
 
It means you made a 50% profit on your initial investment. However, you will need to include the fees (or interest rate) you must pay to get a more accurate picture.

### 6. ATH (All-Time-High):
An asset's all-time high, or ATH, is the highest point it has ever reached. When an asset, such as [Bitcoin](https://www.gate.io/trade/BTC_USDT), reaches its ATH, it indicates that it has reached its highest value in history. In other words, an all-time high is the apex of an asset price curve.

When an asset reaches an all-time high, it may indicate that the market is bullish on that asset and that the overall market is doing well.

Investors who take a more adversarial approach, on the other hand, may interpret ATH as indicating that the crypto price will fall, providing an opportunity to sell assets purchased at a low price.

Traders and investors will attempt to take profits at some point and may place limited orders at specific price levels. It is especially true if previous All-Time Highs are repeatedly broken.

Many investors flee when they realize the uptrend may end, resulting in steep price losses. Therefore, risk management and using a stop-loss order are critical.

### 7. Bull and Bear Market
A bull market, also known as a bull run, is a market condition characterized by upward trends over a specific period. The term bull run also refers to specific assets such as [Bitcoin](https://www.gate.io/trade/BTC_USDT). In other words, when the price of [Bitcoin](https://www.gate.io/trade/BTC_USDT) is trending upwards. While bull markets indicate upward trends, this does not necessarily imply that prices do not fluctuate. However, the longer-term trend is positive or upward. As a result, a bull market may experience price drops or consolidation, but the overall movement is upward. Being 'bullish' refers to an investor's overall expectation that an asset's or cryptocurrency market's price will rise.

A bear market is a market condition characterized by a downward trend over a specific period. Like a bull market, a bear market can apply to specific assets such as [Bitcoin](https://www.gate.io/trade/BTC_USDT), Ethereum, and others. Trading in bear markets can be more complex and difficult for novice traders than in bull markets.

Furthermore, price declines during bear markets can be steep and rapid in some cases. As the market falls, many traders exit their positions, sometimes resulting in mass liquidations.

### 8. ATL (All-Time Low)
An All-Time Low (ATL) is the lowest cryptocurrency price since its inception. An ATL for a coin like [Bitcoin](https://www.gate.io/trade/BTC_USDT) usually happens when there is terrible news about the coin or when most holders start to sell their holdings.

All-time lows usually signal the start of a bear market and lead to further price drops. This drop is because many investors panic when they learn that [Bitcoin](https://www.gate.io/trade/BTC_USDT) has reached a new record low and begin selling the coins for fiat, USDT, or better-performing coins. However, some cryptocurrency traders closely monitor ATLs and use the low price to buy the dip.

### 9. FOMO (Fear of Missing Out)
FOMO is an emotion that accurately describes how a crypto trader feels when the value of specific crypto assets suddenly rises or drops. Nervous traders will sell other assets to purchase coins or NFTs witnessing an uptick in value to alleviate the fear of missing out on potentially huge profits.

Similarly, FOMO can also describe traders' emotions and sudden fear to start unloading coins in response to sharp price drops. Time and again, some investors sell off a coin that is suddenly performing poorly. It is the FOMO of minimizing losses and retaining as much value as possible.

### 1O. FUD (Fear, Uncertainty, and Doubt)
FUD stands for 'fear, uncertainty, and doubt.' It's a common strategy in the crypto space to spread false information to manipulate the perception of a specific cryptocurrency or the entire crypto market. FUD can cause a massive drop in the price of the targeted coin or several coins simultaneously.

Common examples of FUD include media claims that [Bitcoin](https://www.gate.io/trade/BTC_USDT) is a bubble, a Ponzi scheme, or rumors that world governments will outright ban cryptocurrency.

### 11. HODL
The practice of holding onto investments despite price declines is known as HODLing. It's also commonly used in the context of investors ("HODLers") who, despite their lack of skill in short-term trading, want to gain price exposure to cryptocurrencies. It may also be used by investors who strongly believe in a particular currency and wish to hold their investment for an extended period.

The HODLing strategy is similar to the traditional markets' buy-and-hold investing strategy. Buy-and-hold investors look for low-cost assets that they can hold for an extended period.

### 12. BUIDL
BUIDL is a term that, while not as well-known as HODL, is widely used within the crypto community. It is used to encourage cryptocurrency community members to actively contribute to the development of a coin rather than simply hodling and hoping for the best, hoping that someone else does the dirty work. If you genuinely believe in the future of cryptocurrency, you must contribute to developing crypto and blockchain-based projects that will be used.

### 13. AML
AML refers to rules, laws, and processes to prevent criminals from passing off illegally obtained funds as legitimate earnings. AML regulations make it significantly more difficult for criminals to "launder" their money by concealing or misrepresenting its origins.

Criminals will always try to conceal the trustworthy source of their income. There may be several approaches due to the complexities of financial markets.

AML regulations require financial institutions to monitor their clients' activities and report any suspicious behavior. Criminals are less likely to get away with laundering illegally obtained money in this manner.

### 14. DYOR (Do Your Research)
DYOR, which stands for Do Your Own Research, is a term in the cryptocurrency community used to encourage people to think for themselves and do their homework before trading or investing in a cryptocurrency. DYOR embodies the core ethos of cryptography: don't trust, verify. Some of the critical steps in DYOR include: looking for an emerging trend in the crypto space to identify an opportunity, investigating the trend - reading the whitepaper, looking into the team, and looking into the network effects, examining the metrics - Ensuring that the value corresponds to the market opportunity, then choose a trading or an investment strategy.

### 15. DD (Due Diligence)
Due diligence (DD) is linked to DYOR in several ways. It refers to the investigation and cares that a reasonable individual or corporation should exercise before agreeing with another party.

It is assumed that when reasonable commercial entities reach an agreement, they will conduct due diligence on one another.
The same is true for investments. Investors must conduct their due diligence on the project when looking for new investments to ensure all risks are considered. Otherwise, they will be unable to control their financial judgments and may make poor decisions.
 
## Conclusion
The lexicon of crypto trading has continued to grow, with new terms entering the pool in close succession. While some terms originated from stock trading, a significant number are peculiar to the crypto market. Getting familiar with all these terms is a great way to start learning about them and, ideally, building your portfolio of investments.
 
Author - **M. Olatunji,** Gate.io Researcher
-*This article represents only the views of the observers and does not constitute any investment suggestions.*
-*Gate.io reserves all rights to this article. Reposting of the article will be permitted, provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.*