7 Terms You Need To Know As An Cryptocurrency Trader
Whether you are new to the concept of cryptocurrencies, cryptocurrency trading, day trading forex, or even the stock market, there is a high chance that you will hear or come across numerous trading terminologies like FOMO, HODL, ROI, among others, which may sound unfamiliar and have you wondering what they mean. Trading and Investments have their language, and while it can be tasking having to memorize all these terms, it can, however, be very useful, especially if you want to remain current with the latest happenings in the financial market.
As a crypto trader, having to learn certain terms relating to cryptocurrency may seem intimidating at first, but it actually gets easier and eventually begins to make sense along the way. Various crypto terms originated from computer programming and have been around for a long time, while the more recent terminologies in cryptocurrency originated from phrases or slang words popularly used in the cryptocurrency community. This article will focus on some of the most popular and essential trading terms to know, especially if you are trading cryptocurrency. Seven of the most popular terms you need to know as a crypto trader includes;
Fear Of Missing Out(FOMO)
Fear of missing out, otherwise known as FOMO, can be closely associated with a feeling that investors get when they rush to purchase an asset due to the fear of not partaking in a profit opportunity such an asset might present. FOMO can result in parabolic price movements, especially when it is evident in a large number of people. Numerous investors jump into certain positions out of FOMO, especially when emotions are rampant. This usually results in extended moves in both directions, which may most likely trap many traders who attempt to counter-trade the crowd.
The use of FOMO is also applicable to social apps design. Let’s think about it, have you ever thought to yourself why it is difficult to view social media timeline posts in chronological order. This is closely associated with FOMO because if users were able to view all posts since their last login, then they would feel like they have seen all the recent posts, but by mixing both newer and older posts on the time, social media platforms can easily instill FOMO in users resulting in users constantly checking back again for fear of missing out on something important.
Buy And Hold On To It For A Long Time (HODL)
The term HODL is derived from a misspelled “hold” it first appeared in 2013 in a post on the BitcoinTalk forum where the word was a spelling mistake in the title, which read “I AM HODLING.” The term HODLing however, refers to holding on to investment irrespective of the drop in price. It is also applicable in the context of investors known as “HODLers,” who aren’t necessarily good when it comes to short-term trading but seek to get price exposure to cryptocurrency. It can also refer to investors who have a high conviction in a particular asset and prefer to hold on to their investment for an extended period.
The HODling strategy can be likened to the buy and hold investment strategy, common with the traditional markets where buyers buy undervalued assets and hold on to them for a long time. Numerous investors also adopt this strategy for cryptocurrencies like Bitcoin.
Funds Are Safe(SAFU)
The term SAFU originated from a meme that was uploaded by “Bizonacci” Youtube channel, which denotes safe in the crypto world. At that time, a YouTuber made a funny video after the CEO of Binance in July 2018 tweeted “funds are safe,” which somehow got turned into a crypto slang and crypto meme. The video went viral, and Binance went ahead to establish the Secure Asset Fund for Users, also known as SAFU, which is an emergency insurance fund that’s funded by trading fees of 10%. They are often stored in a separate cold wallet.
Return On Investment (ROI)
Return on investment, otherwise known as ROI, is a means of measuring the performance of an investment. It measures and investments return relative to the original cost. It also serves as a convenient way to compare the performance of various investments. When comparing investments, it is also necessary to consider other factors such as asset liquidity, risks, the time factor, and if slippage your purchase price. In a situation whereby a person has 100% ROI, it means such a person has been able to double their money.
Do Your Own Research (DYOR)
DYOR is closely related to Fundamental Analysis, especially when it comes to financial markets. It basically means that investors should carry out the task of doing their own research into their investments without waiting or relying on someone else to do it for them. A commonly used phrase with a similar meaning as used in the cryptocurrency market is “Don’t trust, verify.” One thing that is common with the most successful investors is that they carry out their research and arrive at their conclusions. This means that if anyone wants to be successful in the financial market, they will have to adapt their unique trading strategy. In some cases, this might result in disagreement among various investors, which is a natural aspect of trading and investment.
Due Diligence (DD)
Due Diligence (DD) shares a close similarity to DYOR, and it basically revolves around the investigation a business or a rational individual is expected to making become coming to an agreement with another business or party. It is expected and important for rational business entities to carry out due diligence on each other before coming to an agreement. This is to ensure that there are no potential red flags with any deal. This also applies to investments as investors, when looking for potential investments, need to carry out their own due diligence on potential projects in other to ensure that every possible risk is accounted for.
Know Your Customer (KYC)
KYC, also known as Know Your Customer or Know Your Client guidelines, ensures that organizations or institutions who engage in the trading of financial instruments must confirm as well as validate the identity of their customers. This is essential as the main reason for carrying out this action is to reduce the risk of money laundering. KYC regulations don’t only apply to those in the financial industry, as other sectors also have to strictly comply with these guidelines.
In conclusion, Crypto trading terms may seem a bit confusing and challenging to learn at first, but now that you have an idea of some of the most popularly used ones, they are bound to come in handy, especially in understanding the financial markets. You can also broaden your knowledge by researching other crypto trading terminologies.
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