Bitcoins’ Terminologies: Some Bitcoin Words that You Should be Aware of

As Bitcoin is a completely new approach to payments so, in this article, we are going to cover and explain some of the terms, phrases and concepts that you might hear or come across while dealing with Bitcoin or any other cryptocurrencies for that matter.

Types of Traders

• Day Traders: here the traders indulge in various trades throughout the day and at the end of the day, they try to make profits from the short-term price movements. The Day Traders spend a lot of time staring at the computer screens, and at the end of the day they usually just close their trades.

• Scalpers: Scalping is a day trading strategy that, this method tends to make substantial profits on small price changes. It focuses on extremely short-term trading and it is based on the idea that making small profits repeatedly limits the risks and creates advantages for traders. Scalpers can make hundreds of trades in one day.

• Swing Traders: swing trading tries to take advantage of the natural swing in the price cycles. These traders try to spot the beginning of a specific price movement and enter the trade. Then they hold out until the movement dies out and take the profit. Basically, they try to look at the big picture without constantly monitoring the computer screen.

Methodologies to trade

People follow two main methodologies when they are trading bitcoins: Fundamental Analysis and Technical Analysis.

Let us have a look at them!

• Fundamental Analysis: this methodology looks at the big picture. In the case of bitcoins, it evaluates bitcoin’s industry, news about the currency, technical developments of the bitcoin, regulations around the world or any other news or issues that can affect the success of the bitcoin. This methodology looks at the bitcoin’s value as a technology regardless of the current price.

• Technical Analysis: this methodology tries to predict the price by studying the market statistics such as past price movement and trading volumes. It tries to identify the patterns and trends in the price which may suggest what will happen to the future prices. It assumes the following regardless of what is currently happening in the world, the price movements speak for themselves and tell some sort of a story that helps you predict what will happen next.

What do you think now, which methodology is better?

Well, as we all know that no one can accurately predict the future however, a healthy mix of both the methodologies will probably yield the best results.

Some Trading Terms to know

• Bitcoin Exchanges: they are the online sites where the buyers and sellers are automatically matched. They usually charge lower fees, and there is no direct communication between the buyers and the sellers.

• Orderbook: the complete lists of buy orders and sell orders are listed in the market’s order book which can be viewed on the exchange.

• Bids: the buy orders are called the bids since people are bidding on the prices to buy the bitcoins.

• Asks: the sell orders are called the asks, they show the asking price that the sellers request.

• High and Low: these terms refer to the highest and the lowest prices in the last 24 hours.

• Volume: it stands for the overall total number of bitcoins that have been traded in a given time frame

Types of Orders

• Market order or instant order: it refers to an order that will be instantly fulfilled at any possible price. In this type of order, you don’t stop buying bitcoins until the amount requested is reached. One needs to be careful in this type of order as one might end up paying more than the intended amount, thus needs to be careful.

• Limit Order: here, you will only sell or buy bitcoins at a specific price that you decide on. We can say, the entire order might not be entirely fulfilled since there might not be enough buyers or sellers that meet your requirements.

• Stop-loss Order: this type of order is used for minimizing losses. This type of order basically tells an exchange that if the price drops by a certain percentage or to a certain level, the bitcoins will be sold at a pre-set price.

Who are the Makers and Takers?

Exchanges want to encourage people to trade, thus in simpler words, they want to make a market.

• Market Makers: whenever you create a new order that can’t be matched by any existing buyer or seller, you are basically a market maker and will usually have lower fees.

• Market Takers: they place the orders that are instantly fulfilled as there was already a market maker in the market to match the request. Takers basically remove the business from the exchange thus they usually have higher fees than makers who add orders to the exchange’s order book.

Conclusion

In this article, we focussed on knowing some of the terms used in Bitcoin trading. The types of traders and orders, Trading methodologies followed by people, the Makers and Takers of the bitcoin market, and some more bitcoin terms that one must be aware of.

Written By: Devangi Sharma