Investment Fundamentals: 
A Beginner's Guide to Key Terminology

Types of Traders

Position trader
Swing trader
Day trader
Scalper
A position trader holds a position for months to years. These traders initiate trades after conducting extensive analysis and assessing the general market outlook. They aim to enter a significant trend relatively early and ride it out for an extended period. Consequently, these investors do not trade as frequently and can make decisions calmly, without time pressure. They primarily rely on weekly or monthly charts.
A swing trader holds positions for several days to weeks, aiming to capitalize on short-term market movements. This type of trader conducts daily market analysis to stay well-informed. Swing trading is particularly suitable for individuals with daytime commitments and the ability to dedicate their evenings to monitoring markets and staying updated with current events.

Swing traders primarily rely on technical analysis, emphasizing it over fundamental analysis. They often use 60-minute, daily, and weekly charts.
Day traders execute a few trades each day with the goal of capitalizing on daily market trends. Their positions are typically closed by the end of the trading day. Day trading predominantly occurs on short timeframes, such as the 15-minute chart. Day traders often prefer accumulating multiple small gains over chasing big trends. Day trading is typically a full-time occupation and frequently involves leveraging derivatives, such as futures contracts.
Scalpers are traders who place a large number of trades in a day, often dozens or even hundreds. They concentrate on making numerous, albeit small, profits. Trades are typically completed within seconds or minutes, and the majority of scalpers only operate during the busiest periods of the day when there is sufficient trading volume and market volatility."

Scalpers primarily use minute charts. Due to the high frequency of trades, scalping is mentally demanding and, as a result, may not be suitable for most individuals.

Types of Investments

Cryptocurrencies (spot)
Derivatives
ICOs
Staking
The simplest and most secure method of investing in cryptocurrencies is by purchasing them on the spot market. Both position traders (often called 'hodlers') and swing traders commonly employ this approach to capitalize on significant price movements.

Many traders aim to grow their bitcoin holdings by trading in altcoins. Consequently, BTC pairs often boast the highest liquidity, leading to volatile reactions in other cryptocurrencies when substantial market shifts occur. Bitcoin continues to be viewed as a safe haven within the cryptocurrency industry.
Another investment product gaining popularity in the cryptocurrency market is futures.

In brief, forwards and futures are derivatives of cryptocurrency prices. When trading futures, instead of buying the actual cryptocurrency, you're essentially placing a financial bet on the future price. This type of investment is entirely speculative in nature.

The key difference between options and futures lies in their contractual nature. In an options contract, one party holds a right, while the other has an obligation to buy or sell on a specified date. In futures contracts, both parties have an obligation.

Trading in derivatives like futures and options carries significant risks and is recommended primarily for experienced traders. A solid grasp of terms such as long, short, stop-loss, position size, risk management, risk/reward ratio, leverage, liquidation, margin, and others is crucial.
An Initial Coin Offering (ICO) or launchpad is a fundraising method that involves the use of cryptocurrencies. It is particularly popular among projects that have not yet fully developed their blockchain platform, product, or service. Typically, payments are made in BTC or ETH.

Investors participate in an ICO with the expectation that the project will succeed, leading to increased demand and, consequently, a rise in the value of the underlying tokens. In essence, they are seeking a favorable Return On Investment (ROI) by being early supporters of that specific crypto project.
Staking involves holding cryptocurrency in a crypto wallet to support the operation of a blockchain network. Essentially, it entails locking up cryptocurrency in exchange for receiving rewards. Typically, this process depends on users actively participating in blockchain activities using their personal crypto wallets.

The concept of staking is closely associated with the Proof of Stake (PoS) mechanism, commonly used in many blockchains based on PoS or one of its various variations.

Types of Orders

Market order
Limit order
Stop-Limit order
OCO
A market order is an instruction to buy or sell a financial asset promptly at the available market price.

When placing a market order, it's important to note that market fluctuations can occur between the moment the broker or exchange receives the order and the actual execution of the transaction. This potential price variance can be particularly disadvantageous for larger orders, as they may take more time to fill.
Limit orders are designed to provide investors with greater control over their buying and selling prices. These orders are placed on the order book and come with a specific maximum price or limit, which you determine.

When a limit order is in place, it is executed only when the market price reaches your specified limit. This feature makes limit orders valuable for buying at a lower price or selling at a higher price than the current market rate allows.
The name 'stop-limit order' is indicative of the price restrictions it imposes.

In a stop-limit order, two crucial prices are specified: the stop price and the limit price. The stop price serves as the trigger that converts the order into a sell order, and the limit price determines the minimum price at which you are willing to execute the sale. Unlike a market order, which sells at the most available price, a sell order placed with a limit price will only execute if the market reaches that specified limit or exceeds it.

# Stop price = activation price
# Limit price = specific price
# Sell order: Stop > Limit
# Buy order: Stop < Limit
An OCO (One Cancels the Other) order allows you to place two different orders simultaneously. It's a combination of a limit order and a stop-limit order, with a crucial twist: only one of the two orders can be executed.

In simple terms, once either the limit order or the stop-limit order is fully or partially executed, the remaining order is automatically canceled. It's important to note that canceling one order will also cancel the other. OCO orders can be incredibly useful for various purposes, including profit-taking, risk management, and position establishment or closure. However, before using OCO orders, it's essential to have a solid understanding of both limit and stop-limit orders, as these form the foundation for effectively using OCO orders.
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