Whether you’re new to cryptocurrency, trading the stock market, or day trading Forex, you hear a lot of trading terms, some of which may be unfamiliar. FOMO, ROI, ATH, HODL – what does it all mean? Trading and investing have their own language, and learning all the new terms is not easy. However, they can be very useful if you want to be aware of what is going on in the financial markets. In this article, we have compiled some of the most important trading terms you should know if you are trading cryptocurrency.
Image Source by CCTech
1. Fear, Uncertainty and Doubt (FUD)
Although FUD is not exclusively a trading term, it is often used in the context of financial markets. FUD (Fear, Uncertainty and Doubt) is a strategy aimed at discrediting a particular company, product or project by spreading misinformation about them. The goal is to instill fear and somehow gain an advantage. It can be a competitive, tactical advantage or a profit from a stock price drop caused by potentially dangerous news. Not surprisingly, FUD is quite common in the cryptocurrency industry.
In many cases, investors may open a short position on an asset and then publish potentially dangerous or misleading news. Thus, through manipulation and by shorting or buying put options, large profits can be made. Investors can also make over-the-counter (OTC) trades in advance. In many cases, the information turns out to be false or at least misleading. However, in some cases the news turns out to be true. It is always a good idea to try to consider the arguments on all sides. It can be useful to think about why people publicly express a particular opinion.
2. Fear Of Missing Out (FOMO)
FOMO (Fear Of Missing Out) is an emotion that investors experience when they rush to buy an asset for fear of missing out on a profit opportunity. Because it is associated with severe emotion, FOMO by a large number of people can lead to parabolic price movements.
FOMO is also often used in the development of social media applications. Have you ever wondered why viewing a feed of posts in strictly chronological order is usually more difficult? It has to do with FOMO, too. If users could check all the posts since they last viewed the feed, it would feel like they were seeing all the new posts.
HODL is a term derived from a typo in the word “hold”. It is essentially the cryptocurrency equivalent of the “buy and hold” strategy. The word HODL first appeared in the now-famous BitcoinTalk forum post in 2013. The term was a spelling mistake in the title “I AM HODLING.”
HODL means holding investments despite falling prices. It is often used in the context of investors (“HODLers”) who are admitted not very good at shortterm trading but want to profit from the rising price of a cryptocurrency. The term can also be used in the context of investors who have high expectations for a particular coin and intend to hold the investment for a long period of time.
The HODL strategy is similar to the “buy and hold” investment strategy in traditional markets. Such investors try to find undervalued assets and hold them for a long time. Many investors apply this strategy to Bitcoin. If you read our article on dollar value averaging (DCA), you know that for Bitcoin, this strategy has been very profitable. If you bought $10 worth of BTC every week for the past five years, you would get a return seven times your initial investment!
BUIDL is a derived term from HODL. It describes participants in the cryptocurrency industry who continue to “build” regardless of price fluctuations. The basic idea is that true crypto-enthusiasts continue to grow the ecosystem despite brutal bear markets. In this sense, BUIDLers are genuinely interested in what blockchain and cryptocurrencies can bring to the world, and are actively working toward that goal.
BUIDL is a way of thinking that aims to show that cryptocurrencies are not just a theory, but the spread of technology to the masses. It is a reminder that we must remain calm and continue to build an infrastructure that billions of people can use in the future. In addition, BUIDLers understand that teams that work with a longterm footprint are more likely to succeed in the long run.
The word SAFU appeared thanks to a video uploaded to YouTube by user Bizonacci. During an unscheduled maintenance of the Binance platform, Binance CEO Changpeng Zhao (CZ) said that “funds are safe.
The video went viral in the cryptocurrency industry. In response, Binance established the Secure Asset Fund for Users (SAFU), an emergency fund funded by 10% of trading fees. These funds are kept in a separate cold wallet. The idea is that in an emergency SAFU can cover the loss of user funds, providing additional protection for Binance users. That’s why you may often hear the phrase “funds are safu.
6. Return on Investment (ROI)
Return on Investment (ROI – Return on Investment) is a way of measuring the effectiveness of an investment. ROI measures the return on investment relative to the original cost. It is also a convenient way to compare the profitability of different investments.
Below is the formula for calculating ROI. The original investment is subtracted from the current return on investment. The resulting number is then divided by the original investment amount. ROI = Current Return on Investment – Volume of Investment / Volume of Investment Let’s say you bought Bitcoin for $6,000.
The current market price of Bitcoin is $8,000. ROI = (8000-6000)/6000 ROI = 0.33 This means that the profitability of the initial investment is 33%. To get a more accurate calculation, you need to take into account the commissions (or interest rate).
However, the bare numbers aren’t the whole picture. Other factors come into play when comparing investments. What are the risks? What is the time horizon? How liquid is the asset? Can slippage affect the purchase price? ROI by itself is not a definitive measure, but it is a useful tool for measuring investment performance.
Second part will come soon.