EDUCATION

CRYPTO GLOSSARY




Address

Address is a place where cryptocurrency can be sent to and from, in the form of a string of letters and numbers. A cryptocurrency address can be shared publicly in the form of text or QR code to those who want to send you cryptocurrency.

Airdrop

Airdrop is a marketing campaign that distributes a specific cryptocurrency or token to an audience. It is usually initiated by the creator of a cryptocurrency in order to encourage the use and build the popularity of the coin or token. Most airdrop campaigns run with mechanics such as receiving coins or tokens in exchange for simple tasks like sharing news, referring friends, or downloading an app.

Algorithm

Algorithm is a process or set of rules to be followed in problem-solving or calculation operations, usually by a computer, although humans tend to follow steps algorithmically as well (let’s say doing math or following a recipe).

All Time Low (ATL)

An All-Time Low (ATL), or a record low is the lowest price yet since a financial instrument was unveiled. All-time lows can be recorded per year, month, per week, or day. For Bitcoin, ATLs usually follow bad news about the coin or waning interest from holders and users.

Alpha

A software development team often works to release its product in stages. A common practice is to solicit input and advice from a community, such that ideas, suggestions, and improvements can be shared and incorporated before a final product is released to the general public.

Altcoin

Altcoin is the term given to describe alternative digital assets, such as a coin or token that is not Bitcoin. This nomenclature comes from the idea that Bitcoin is the original cryptocurrency and that all others are then considered “alternate” or “alternative” coins.

Altcoin Trader

An Altcoin trader is a person who trades cryptocurrencies, But not with Bitcoin, Because Bitcoin is not Altcoin. Top altcoins: Eth, BNB, DOT, ADA, LTC, XRP. link, etc.

AML

Anti-money laundering (AML) is a broad term for laws and regulations put in place to prevent criminals from making money illegally or moving illicit funds. While many illegal activities are targeted by AML laws, some of the most important are tax evasion, public corruption, and market manipulation through methods such as wash trading.

Anarcho-capitalism

A political philosophy and school of thought that believes in removing centralized states in favor of self-ownership, private property and free markets. Many of the early adopters of Bitcoin were proponents of anarcho-capitalism, believing it would give power and control back to the masses.

API

API stands for Application Programming Interface. It is a set of routines, protocols, and tools for building software applications. APIs specify how software components should interact, such as what data to use and what actions should be taken.

Arbitrage

A practice of taking advantage of differences in price of the same commodity in two or more markets or exchanges. For example, cryptocurrency prices on Korean exchanges can be different from those on US exchanges. An arbitrage trader would be in both markets in order to buy in one and sell in another for profit.

Ashdraked

A situation where you lose all your money, more specifically when you lose all your money shorting Bitcoin. This was based on a story of a Romanian trader who continued to short BTC when it went from $300 to $500, since he had made a lot of profit doing so historically. Adapt your trading strategy!

ASIC

Short for ‘Application Specific Integrated Circuit’; it is a mining equipment that is used specifically to mine a certain cryptocurrency. Often compared to GPUs, ASICs are specially created and bought for mining purposes and offer significant efficiency improvements and power savings due to its narrow use case.

Astroturfing

A deceptive practice where a sponsor is masked or hidden, making it seem as though a marketing message came from and is strongly supported by the community when it is not.

ATH

The term “All-Time High” relates to the highest price that an asset has achieved on an exchange, for the current trading pair that is being referenced. For example, if a share of stock in XZY Corp comes to IPO at a price of $5 per share, then trades as high as $20 per share, before falling to $10 in a certain period of time, we could say that the “All-Time High” for the XZY Corp share price was $20.

Atomic Swap

Atomic swap is a technology based on smart contracts that enables the exchange of different cryptocurrencies without the need for a centralized market or other intermediaries. Also known as atomic cross-chain trading, atomic swaps involve the trade of one cryptocurrency to another, even if they are running in different blockchain networks.

Attack 51%

If more than half the computer power or mining hash rate on a network is run by a single person or a single group of people, then a 51% attack is in operation. This means that this entity has full control of the network and can negatively affect a cryptocurrency by taking over mining operations, stopping or changing transactions, and double-spending (reusing) coins. Attestation Ledger An attestation ledger is an account book designed to provide evidence of individual transactions. It is generally used to “attest” that a financial transaction took place, or to prove authenticity of transactions or products.


Bag

In the crypto space, the word bag refers to the coins, and tokens one is holding as part of their portfolio. Typically, the term is used to describe a significant amount of a particular cryptocurrency. There is no defined minimum, but when the value is relatively high, one could say they are holding “heavy bags” of a certain coin or token.

Bagholder

A person who holds large quantities, or bags, of a cryptocurrency. Often used to describe such a person when the price of that cryptocurrency is declining.

Bear Market

The term bear market refers to a negative trend in the prices of a market. It is widely used not only in the cryptocurrency space but also in the traditional markets, such as stocks, bonds, real estate, and commodities markets.

Bear Trap

A technique played by a group of traders, aimed at manipulating the price of a cryptocurrency. The bear trap is set by selling a large amount of the same cryptocurrency at the same time, fooling the market into thinking there is an upcoming price decline.

Bitcoin

Bitcoin is a digital form of money that runs on a distributed network of computers "nodes". In a broader sense, though, many people often use the word Bitcoin to refer to a few different things: a digital currency, a decentralized public ledger, a protocol, or simply the big ecosystem that encompasses all of these.

Bitcoin ATM "BTM"

A machine from which you can Buy or Sell Bitcoin and get Cash. Example: BTC to USD, BTC to EUR, etc. At the moment in the world are 7586+ active bitcoin ATM machine

Bitcoin Halving

Bitcoin Halving is an event that occurs approximately every four years and prevents coin inflation while halving the reward for miners for a mined block.

Bitcoin Improvement Proposal "BIP"

Bitcoin Improvement Proposal is A technical design document providing information to the Bitcoin community, describing new proposed features, processes or environments affecting the Bitcoin protocol. Suggested changes to the protocol are submitted as a BIP. The BIP author is responsible for soliciting feedback and consensus for his or her suggested improvements within the community and documenting dissenting opinions.

BitLicense

A business license issued to cryptocurrency companies in New York, created and provided by the New York State Department of Financial Services (NYSDFS).

Bits

Bits is a sub-unit of one bitcoin. Any form of money needs to be easily broken down into sub-units to allow an equal exchange for goods or services. And bitcoin is wonderfully divisible, with its smallest unit being the tiny 0.00000001 of a bitcoin – a unit known as a ‘satoshi’. There are 1,000,000 bits in one bitcoin.

Block

A container or collection of transactions occurring every time period on a blockchain. In short, the term block refers to computer files that store transaction data. These blocks are arranged in a linear sequence that forms an endless chain of blocks - hence, the term blockchain.

Block Explorer

An online tool to view all transactions that have taken place on the blockchain, network hash rate, and transaction growth, among other useful information. In short, a block explorer is a tool that provides detailed analytics about a blockchain network since its first day at the genesis block. We can say a block explorer acts as a search engine and browser where users can find information about individual blocks, public addresses, and transactions associated with a specific cryptocurrency.

Block Height

The number of blocks preceding the block in question on the blockchain, or can be thought of as total blocks in the chain before this point.

Block Reward

An incentive for a miner who successfully calculates a valid hash in a block during mining. By contributing to the security and liveness of the chain, the miner is rewarded with this incentive, ensuring that miners continue to act in the best interest of the blockchain by legitimately taking part in the process (instead of hacking it).

Blockchain

A blockchain is a continuously growing, append-only, list of records called blocks, which are linked and secured using cryptography.

Bollinger Band

A tool developed by Bollinger to help in the recognition of systemic pattern recognition in prices; it is a band that is plotted two standard deviations away from the simple moving average, or exponential moving average in some cases.

Bots

Automated trading software bots that execute trade orders extremely quickly, based on a preset algorithm of buy-and-sell rules. Brute Force Attack "BFA" Brute Force Attack is a method of trial-and-error, in which automated software generates and tries a large number of possible combinations in order to crack a code or key.

Bubble

A bubble describes a situation where market participants drive prices up above their value, which is usually followed by a steep, rapid drop in prices as the market corrects.

Bug Bounty

A reward offered for finding vulnerabilities and issues in computer code. It is often offered by cryptocurrency companies like protocols, exchanges and wallets to identify potential security breaches or bugs before they are exploited by unfriendly parties.

Bull Market

The term bull market refers to a positive trend in the prices of a market. It is broadly used not only in the cryptocurrency space but also in the traditional markets. In short, a bull market concerns to a strong market uptrend that presents meaningful rising prices over a relatively short period of time. When compared to traditional markets, cryptocurrency markets are smaller and consequently more volatile. Therefore, it is quite common to see strong and consistent bull runs, where a 40% price increase in 1 or 2 days is quite common.

Bull Trap

A false market signal where the declining trend of an asset appears to be on the upturn, but does not actually materialize, leading bulls to lose money after going long. Burned When a coin or token has been made permanently unspendable or unusable.

Buy The F**** Dip - BTD / BTFD

Buy The F**** Dip an enthusiastic exclamation by supporters of a cryptocurrency to buy while prices are at a low point.

Buy Wall

A situation where a large limit order has been placed to buy when a cryptocurrency reaches a certain value. This can sometimes be used by traders to create a certain impression in the market, preventing a cryptocurrency from falling below that value, as demand will likely outstrip supply when the order is executed.

Byzantine Fault Tolerance "BFT"

Byzantine Fault Tolerance is a property of fault-tolerant distributed computing systems, reaching consensus through a mechanism, where components may fail and there may be imperfect information. For example, Bitcoin is Byzantine Fault Tolerant, utilizing the Proof-of-Work system to reach a consensus on the blockchain. Its applications are beyond blockchain, including messaging and networking systems, among others.

Byzantine Generals Problem

Byzantine Generals Problem is a situation where communication that requires consensus on a single strategy from all members within a group or party cannot be trusted or verified. An example of this agreement problem is where a group of generals, encircled around a city, must decide whether to attack or retreat. Every general must agree to attack or retreat, or everyone will be worse off. Some generals may be treacherous, voting falsely, and messengers may deliver false votes. Under these circumstances, a consensus must be reached. In cryptocurrency, when network participants post false or inaccurate information to others about transactions taking place, it could lead to network failure.


Candlesticks

Candlesticks is a graphing technique used to show changes in price over time. Each candle provides 4 points of information: opening price, closing price, high, and low. Also known as “candles” for short.

Cash

Cash is physical form of a currency, such as banknotes or coins.

Central Ledger

A ledger maintained by a centralized agency (such as a bank) that records all financial transactions.

Central Processing Unit (CPU)

Central Processing Unit, also known as a processor or CPU, is defined as the “brains” of the computer, coordinating different components running on a computer. CPU clock speed is measured in gigahertz or GHz for short.

Centralized

The concept of centralization relates to the distribution of power and authority in an organization or a network. When a system is centralized, it means that the planning and decision-making mechanisms are concentrated at a particular point within the system.

Chain Split

Chain Split is another term used to describe Fork and is accordingly a situation where a blockchain splits into two separate chains. Chain Splits generally happen in the crypto world when new governance rules are built into the blockchain’s code.

Change

Bitcoin transactions are made up of inputs and outputs, in a system called Unspent Transaction Output. When you send bitcoins, you can only send them in a whole output, and the rest are sent back as change.

Cipher

The name given to the algorithm that encrypts and decrypts information.

Circulating Supply

The best approximation of the number of coins that are circulating in the market and in the general public’s hands.

Close

Refers to the closing price; similar to the same term used in financial stocks.

Cloud Mining

Mining with remote processing power rented from companies operating outfits in countries like Iceland, where the electricity is abundant and cost-efficient, and the ambient temperature is cold year-round. Another term for this is mining contract.

Co-Signer

A person or entity that has partial control and access over a cryptocurrency wallet.

Coin

Coin is a cryptocurrency or digital cash that is independent of any other blockchain or platform. The key feature of a coin is that of a currency, and the term may also be used to describe a cryptocurrency asset that is not a token.

Coinbase

First designed in the Bitcoin system, a coinbase is a compulsorily-included transaction on a block, the output of which directs where to send the mining reward. In the Bitcoin system, the coinbase has a 100-byte size input, where messages can be attached or used as an extra nonce.

Cold Storage

Offline storage of cryptocurrencies, typically involving hardware non-custodial wallets, USBs, offline computers, or paper wallets

Cold Wallet

A cryptocurrency wallet that is in cold storage, i.e. not connected to the internet.

Confirmations

A transaction is only confirmed when it is included in a block on the blockchain, at which point it has one confirmation. Each additional block is another confirmation. Different exchanges require a different number of confirmations to consider a cryptocurrency transaction final.

Consensus

Consensus is achieved when all participants of the network agree on the order and content of blocks and transactions contained in those blocks.

Consortium Blockchain

A privately-owned and -operated blockchain in which a consortium shares information not readily available to the public, while relying on the immutable and transparent properties of the blockchain.

Correction

A correction is a (usually negative) reverse movement of at least 10% in a cryptocurrency or general market, to adjust for over- or under-valuations.

Crypto Angel Investor

Angel Investor Also called a seed or private investor, angel investors actively seek out opportunities to provide funding for entrepreneurs or start-up companies. They are often individuals with high net worth who are seeking new methods of expanding their wealth while simultaneously helping to launch an up and coming venture.

Crypto Fundamental Analysis

Crypto Fundamental Analysis This is a method of measuring core strengths that not only determines the risks associated with any cryptocurrency but also have a large impact on the cryptocurrency price action.

Crypto-jacking

The use of another party’s computer to mine cryptocurrency without their consent.

Cryptoasset

Cryptoassets leverage cryptography, consensus algorithms, distributed ledgers, peer-to-peer technology and/or smart contracts to function as a store of value, medium of exchange, unit of account, or decentralized application.

Cryptocurrency

A cryptocurrency is a digital medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

Cryptographic Hash Function

Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input. The SHA-256 algorithm is an example of a cryptographic hash function.

Cryptography

A field of study and practice to secure information, preventing third parties from reading information to which they are not privy.

Custodial

Usually referring to the storage of keys, in relation to wallets or exchanges, a custodial set-up is one in which private keys are being held by the service provider while they provide a login account.

Cypherpunk

An activist who advocates for the mass adoption and use of strong cryptographic solutions and privacy-enhancing technologies to enact social and political progress.


Dark Web

A portion of internet content existing on darknets, not indexed by search engines, that can only be accessed with specific software, configurations or authorizations.

Date of Launch

Is a term used for when ICOs will put up their tokens for sale.

Dead Cat Bounce

A temporary recovery in prices after a huge decrease.

Decentralized

Decentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a global goal.

Decentralized Applications (dApps)

A type of application that runs on a decentralized network, avoiding a single point of failure.

Decentralized Autonomous Initial Coin Offerings (DAICO)

A method for decentralized funding of projects, combining ideas from Decentralized Autonomous Organizations (DAOs) and Initial Coin Offerings (ICOs), proposed by Vitalik Buterin, creator of Ethereum. It introduces a form of governance in the ICO process, allowing backers to vote for the return of their funds if certain conditions are met.

Decentralized Autonomous Organizations (DAO)

An organization that is run through rules encoded in smart contracts.

Decentralized Exchange (DEX)

A peer-to-peer exchange that allows users to buy and sell cryptocurrency and other assets without a central intermediary involved.

Decryption

The process of transforming data that has been rendered unreadable through encryption back to its unencrypted form.

Deflation

Reduction of the general level of prices in an economy. May also refer to deflationary monetary policy, such as Bitcoin, where there is a fixed supply of coins.

Delegated Proof-of-Stake (DPOS)

A consensus mechanism where users can vote for delegates producing blocks on the blockchain, with votes proportional to their stake. It aims to increase efficiency and environmental friendliness of blockchain consensus protocols.

Depth Chart

A graph that plots the requests to buy (bids) and the requests to sell (asks) on a chart, based on limit orders. The chart shows the point at which the market is most likely to accept a transaction.

Derivative

A contract deriving its value from the performance of an underlying asset, index, or interest rate.

Derivatives Market

A public market for derivatives, instruments such as futures contracts or options, which are derived from other forms of cryptocurrency assets.

Deterministic Wallet

A type of wallet that derives keys from a starting point called a seed. As long as you have this seed, you are able to backup and restore any wallet.

Difficulty

A relative measure of how difficult it is to discover a new block. In Bitcoin, the difficulty is adjusted periodically as a function of how much hashing power has been deployed by the network of miners.

Digital Commodity

An intangible asset that is transferred electronically, and has a certain value.

Digital Currency

Digital currency, also known as digital money or electronic money or electronic currency, is a type of currency available only in digital form, allowing for instantaneous transactions and borderless transfer-of-ownership.

Digital Identity

Digital representations and storage of personal information such as name, address, social security number, and more; on the blockchain, digital identity can be decentralized and used for identity verification in a secure manner.

Digital Signature

A digital code generated by key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity.

Dildo

A dildo is a long green or red bar found on a graph showing the changes in price of a cryptocurrency, in relation to the green and red candles found on price charts.

Directed Acyclic Graph (DAG)

A directed acyclic graph or DAG is a structure that is built out in one single direction and in such a way that it never repeats.

Distributed Consensus

Collective agreement by various computers in a network enabling it to work in a decentralized manner without a central authority.

Distributed Denial of Service (DDoS) Attack

A cyber-attack in which the perpetrator seeks to make a machine or network resource unavailable, disrupting services of a host connected to the Internet, by overloading the system with requests so that legitimate requests cannot be served.

Distributed Ledger

Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not necessarily involve a cryptocurrency and may be permissioned and private.

Distributed Ledger Technology (DLT)

The technology underlying distributed ledgers. This term is most often discussed in the context of enterprise use cases around adoption of distributed ledger technology.

Distributed Network

A type of network where processing power and data are spread over the nodes without a centralized data center or authority.

Dolphin

A person who owns a moderate quantity of cryptocurrency. This person does not qualify to be a whale, but has evolved from being a fish/minnow.

Dominance

Also known as BTC Dominance for Bitcoin Dominance, it is an index that compares the market capitalization of Bitcoin with the overall market cap of all other cryptocurrencies in existence.

Double Spending

A situation where a sum of money is (illegitimately) spent more than once.

Dump

To sell off all your coins.

Dumping

The action of collective market sell-offs, creating downward price movement.

Dust Transactions

Minuscule transactions that flood and slow the network, usually deliberately created by people looking to disrupt it.

DYOR

Age-old adage: “Do Your Own Research”. Don’t just take people at their word.


ELI5

Stands for “Explain Like I’m 5”, an explanation so simple that even a five-year-old can understand it.

Emission

Emission, also known as Emission Curve, Emission Rate, and Emission Schedule, is the speed at which new coins are created and released.

Enterprise Ethereum Alliance (EEA)

A group of Ethereum developers, startups, and large corporations working together to commercialize and use Ethereum for business applications.

ERC-20

A token standard for Ethereum, used for smart contracts implementing tokens. It is a common list of rules defining interactions between tokens, including transfer between addresses and data access.

ERC-721

A token standard for non-fungible Ethereum tokens. An Ethereum Improvement Proposal introduced in 2017, it enables smart contracts to operate as tradeable tokens similar to ERC-20 tokens.

Escrow

An escrow is a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties, with the disbursement dependent on conditions, agreed to by the transacting parties. This is possible to be automated using smart contracts on the blockchain.

Ether

The form of payment used in the operation of the distribution application platform, Ethereum, in order to incentivize machines into executing the requested operations.

Ethereum Improvement Proposal (EIP)

Ethereum Improvement Proposals EIP, Means describes standards for the Ethereum platform, including core protocol specifications, client APIs, and contract standards.

Ethereum Virtual Machine (EVM)

A Turing-complete virtual machine that enables execution of code exactly as intended; it is the runtime environment for every smart contract. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.

Exchange

Cryptocurrency exchanges (sometimes called digital currency exchanges) are businesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies.

Exchange Traded Fund (ETF)

A security that tra


Faucet

A cryptocurrency reward system usually on a website or app, that rewards users for completing certain tasks. It is mostly a technique used when first launching an altcoin to interest people in the coin.

Fiat

Fiat currency is “legal tender” backed by a central government, such as the Federal Reserve, and with its own banking system, such as fractional reserve banking. It can take the form of physical cash, or it can be represented electronically, such as with bank credit.

Fiat-Pegged Cryptocurrency

Also known as “pegged cryptocurrency”, it is a coin, token, or asset issued on a blockchain that is linked to a government- or bank-issued currency. Each pegged cryptocurrency is guaranteed to have a specific cash value in reserves at all times.

Fish

A fish, or minnow, is someone who holds insignificant amounts of cryptocurrencies, often at the mercy of whales who move the market up and down.

Flippening

A situation hoped for by Ethereum fans, where the total market cap of Ethereum surpasses the total market cap of Bitcoin.

Flipping

An investment strategy (mostly popularized by real estate investing) where you buy something with the goal of reselling for a profit later, usually in a short period of time. In the context of ICOs, flipping refers to the strategy of investing in tokens before they are listed on exchanges, then quickly reselling them for a profit when they start trading on exchanges in the secondary market.

FOMO

An acronym that stands for 'fear of missing out' and in the context of investing, refers to the feeling of apprehension for missing out on a potentially profitable investment opportunity and regretting it later.

Fork (Blockchain)

Forks, or chain splits, create an alternate version of the blockchain, leaving two blockchains to run simultaneously. An example is Ethereum and Ethereum Classic, which was forked after the DAO hack.

Fork (Software)

A software fork, also known as a project fork, is when developers take the technology (source code) from one existing software project and modify it to create a new project. An example is Litecoin, which was a software fork of Bitcoin.

FUD

An acronym that stands for “fear, uncertainty, and doubt”. It is a strategy to influence perception of certain cryptocurrencies or the cryptocurrency market in general by spreading negative, misleading or false information.

FUDster

Someone that is spreading FUD.

Full Node

Nodes that download a blockchain’s entire history in order to observe and enforce its rules.

Fundamental Analysis (FA)

A method in which you research the underlying value of an asset by looking at the technology, team, growth prospects and other indicators. Some people perform fundamental analysis as part of an investment strategy called “value investing”.

Futures

A futures contract is a standardized legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. They are different from forward contracts, which can be customized for each trade and can be conducted over-the-counter, instead of being traded on an exchange.


Gains

Gains refer to an increase in value or profit.

Gas

A term used on the Ethereum platform that refers to a unit of measuring the computational effort of conducting transactions or smart contracts, or launch dApps in the Ethereum network. It is the “fuel” of the Ethereum network.

Gas Limit

A term used on the Ethereum platform that refers to the maximum amount of gas the user is willing to spend on a transaction.

Gas Price

A term used on the Ethereum platform that refers to the price you are willing to pay for a transaction. Setting a higher gas price will incentivize miners to prioritize that transaction over others.

Genesis Block

The first block of data that is processed and validated to form a new blockchain often referred to as block 0 or block 1.

Gold-Backed Cryptocurrency

A coin or token issued that represents a value of gold; for example, one physical gram of gold equals to one coin. The gram of gold is stored in a safe and can be traded with other coin holders.

Graphical Processing Unit (GPU)

More commonly known as a graphics card, it is a computer chip that creates 3D images on computers but has turned out to be efficient for mining cryptocurrencies.

Group Mining

Another term used to describe a Mining Pool.

Gwei

The denomination used in defining the cost of gas in transactions involving Ether.


Hacking

Hacking is the process of using a computer to manipulate another computer or computer system in an unauthorized fashion.

Halving

An event in which the total rewarded bitcoins per confirmed block halves, happening every 210,000 blocks mined.

Hard Cap

The maximum amount that an ICO will raise. If a hard cap is reached, no more funds will be collected.

Hard Fork

Hard Fork is a type of protocol change that validates all previously invalid transactions and invalidates all previously valid transactions. This type of fork requires all nodes and users to upgrade to the latest version of the forked protocol software. In a hard fork, a single cryptocurrency permanently splits into two, resulting in one blockchain that follows the old protocol and the other that follows the newest protocol. Some examples are Bitcoin and Bitcoin Cash, or Ethereum and Ethereum Classic.

Hash

The act of performing a hash function on input data of arbitrary size, with an output of fixed length that looks random and from which no data can be recovered without a cipher. An important property of a hash is that the output of hashing a particular document will always be the same when using the same algorithm.

Hash Function

Any function used to map data of arbitrary size to data of a fixed size.

Hash Power / Hash Rate

A unit of measurement for the amount of computing power being consumed by the network to continuously operate. The Hash Rate of a computer may be measured in kH/s, MH/s, GH/s, TH/s, PH/s or EH/s depending on the hashes per second being produced.

Hidden Cap

Hidden cap is an unknown limit to the amount of money a team elects to receive from investors in its Initial Coin Offering (ICO). The purpose of a hidden cap is to even the playing field by letting smaller investors put in money, without the large investors forming an accurate understanding of the total cap and adjusting their investment as a result.

Hierarchical Deterministic Wallet (HD Wallet)

A wallet that uses Hierarchical Deterministic (HD) protocol to support the generation of crypto-wallets from a single master seed using 12 mnemonic phrases.

HODL

A type of passive investment strategy where you hold an investment for a long period of time, regardless of any changes in the price or markets. The term first became famous due to a typo made in a bitcoin forum, and the term is now commonly expanded to stand for “Hold On for Dear Life”.

Hosted Wallet

Hosted Wallet is a hosted crypto wallet is a digital wallet in which your private keys are stored. In exchange, the wallet takes care of the backup and security of your funds.

Hot Storage

The online storage of private keys allowing for quicker access to cryptocurrencies.

Hybrid PoW/PoS

A hybrid PoW/PoS allows for both Proof-of-Stake and Proof-of-Work as consensus distribution algorithms on the network. This approach aims to bring together the security of PoW consensus and the governance and energy efficiency of PoS.

Hyperledger (Hyperledger Foundation)

Hyperledger is an umbrella project of open-source blockchains and blockchain-related tools started by the Linux Foundation in 2015 to support the collaborative development of blockchain-based distributed ledgers.


Immutable

A property that defines the inability to be changed, especially over time.

Inflation

A general increase in prices and fall in the purchasing value of money.

Initial Bounty Offering (IBO)

An Initial Bounty Offering or IBO in crypto is the limited-time process by which a new cryptocurrency is made public and distributed to people who invest time and skill into earn rewards in the new cryptocurrency, such as doing translation or marketing. Unlike an Initial Coin Offering where you can buy coins, an IBO requires more mental commitment from the receiver.

Initial Coin Offering (ICO)

A type of crowdfunding, or crowdsale, using cryptocurrencies as a means of raising capital for early-stage companies. It has come under fire due to the occurrence of scams and market manipulators.

Initial Token Offering (ITO)

Similar to ICOs, but the focus is on the offering of tokens with proven (or unproven) intrinsic utility in the form of software or usage in an ecosystem.

Instamine

A period in time, shortly after launch, when a large portion of total mineable coins or tokens are mined in a compressed time frame, and may be unevenly and quickly distributed to investors.

Intermediary / Middleman

An intermediary, or middleman, is a person or entity that acts as the go-between different parties to bring about agreements or carry out directives.


JOMO

The opposite state of FOMO, JOMO stands for “Joy of Missing Out”. Most often used by no-coiners who declare their happiness that they are not involved in cryptocurrencies, usually when prices are declining or a scam ICO is revealed.


KYC

Acronym for “Know Your Customer”, this process refers to a project’s or financial institution’s obligations to verify the identity of a customer in line with global anti-money laundering laws.


Lambo

Shorthand for Lamborghini, an exotic car that people often refer to in their excitement over getting rich from cryptocurrencies. Often used in cryptocurrency communities when asking when prices may rise again by saying: “When Lambo?” It is usually combined with “When moon?”

Ledger

A record of financial transactions that cannot be changed, only appended with new transactions.

Leverage

A loan offered by a broker on an exchange during margin trading to increase the availability of funds in trades.

Lightning Network

The Lightning Network is a "second layer" payment protocol that operates on top of a blockchain. Theoretically, it will enable fast, scalable transactions between and across participating nodes, and has been touted as a solution to the Bitcoin scalability problem.

Limit Order / Limit Buy / Limit Sell

Orders placed by traders to buy or sell a cryptocurrency when a certain price is reached. This is in contrast with market orders at which a cryptocurrency is sold at the current best available price.

Liquidity

How easily a cryptocurrency can be bought and sold without impacting the overall market price.

Long

A situation where you buy a cryptocurrency with the expectation of selling it at a higher price for profit later.


Mainnet

An independent blockchain running its own network with its own technology and protocol. It is a live blockchain where its own cryptocurrencies or tokens are in use, as compared to a testnet or projects running on top of other popular networks such as Ethereum.

Margin Call

When an investor’s account value falls below the margin maintenance amount. The broker will then demand that the investor deposit additional money or securities to meet the minimum required maintenance amount to continue trading.

Margin Trading

A practice where a trader uses borrowed funds from a broker to trade a cryptocurrency, which forms the collateral for the loan from the broker. It can be relatively risky for inexperienced traders who may receive a margin call if the market moves in the opposite direction of their trades. * Margin Bear Position: The position you are taking if you are going “short” on margin. * Margin Bull Position: The position you are taking if you are going “long” on margin

Market

An area or arena, online or offline, in which commercial dealings are conducted. Usually referred to as the “crypto market”, which refers to the cumulative cryptocurrencies and projects operating within the industry.

Market Capitalization / Market Cap / MCAP

Total capitalization of a cryptocurrency’s price. It is one of the ways to rank the relative size of a cryptocurrency. Market Cap = Current Price x Circulating Supply Market Order / Market Buy / Market Sell A purchase or sale of a cryptocurrency on an exchange at the current best available price. Market orders are filled as buyers and sellers are willing to trade. This is in contrast with limit orders at which a cryptocurrency is sold only at a specified price.

Masternodes

Masternodes are a server maintained by its owner, somewhat like full nodes, but with additional functionalities such as anonymizing transactions, clearing transactions, and participating in governance and voting. It was initially popularized by Dash to reward owners of these servers for maintaining a service for the blockchain.

Max Supply

The best approximation of the maximum amount of coins that will ever exist in the lifetime of the cryptocurrency.

mBTC

m฿ or mBTC are MilliBitcoin. 1 mBTC is equal to 0.001 Bitcoin "BTC".

Merkle Tree

A tree structure in cryptography, in which every leaf node is labelled with the hash of a data block and every non-leaf node is labelled with the cryptographic hash of the labels of its child nodes. Hash trees allow efficient and secure verification of the contents of blockchains, as each change propagates upwards so verification can be done by simply looking at the top hash.

MicroBitcoin (uBTC)

One-millionth of a bitcoin or 0.000001 of a bitcoin. Often confused as a fork of Bitcoin.

Microtransaction

A business model where very small payments can be made in exchange for common digital goods and services, such as pages of an ebook or items in a game.

Mineable

Some cryptocurrencies have a system through which miners can be rewarded with newly-created cryptocurrencies for creating blocks through contributing their hash power. Cryptocurrencies with this ability to generate new cryptocurrencies through the process of confirmation is said to be mineable. * Not Mineable: Some cryptocurrencies are generated only through other mechanisms, such as annual inflation through staking. These cryptocurrencies are said to be not mineable.

Miners

Contributors to a blockchain taking part in the process of mining. They can be professional miners or organizations with large-scale operations, or hobbyists who set up mining rigs at home or in the office.

Mining

A process where blocks are added to a blockchain, verifying transactions. It is also the process through which new bitcoins or some altcoins are created.

Mining Contract

Another term for cloud mining, where users can rent or invest in mining capacity online.

Mining Pool

A setup where multiple miners combine their computing power to gain economies of scale and competitiveness in finding the next block on a blockchain. Rewards are split according to different agreements, depending on the mining pool. Another term for this is Group Mining.

Mining Reward

The reward resulting from contributing computing resources to process transactions. Mining rewards are usually a mix of newly-minted coins and transaction fees.

Mining Rig

A computer being used for mining. A mining rig could be a dedicated piece of hardware for mining, or a computer with spare capacity that can be used for other tasks, only mining part-time.

Minnow

Another term used to describe Fish.

Mixing Service

Also known as Tumbler, it is a service to improve the privacy and anonymity of cryptocurrency transactions by mixing potentially identifiable or “tainted” cryptocurrencies with other unrelated transactions, making it harder to track what the cryptocurrency was used for and who it belongs to.

Mnemonic Phrase

A mnemonic phrase (also known as mnemonic seed, or seed phrase) is a list of words used in sequence to access or restore your cryptocurrency assets. It should be kept secret from everyone else. It is a standard in most HD wallets.

Mnemonics

Mnemonics are memory aids with a system such as letters or associations that help in recall.

Money Transmitter/Money Transfer License

In the legal code of the United States, a money transmitter or money transfer service is a business entity that provides money transfer services or payment instruments, whether it is real currency, cryptocurrency, or any other value. Money Transmitters in the US are part of a larger group of entities called money service businesses or MSBs.

Moon

A situation where there is a continuous upward movement in the price of a cryptocurrency. Often used in communities to question when a cryptocurrency will experience such a phenomenon, saying: “When moon?” It is usually combined with “When Lambo?”

Moving Average Convergence Divergence (MACD)

A technical analysis method, it is a trend-following momentum indicator that shows the relationship between two price moving averages. The calculation is done by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA.

Multi-Signature (Multi-sig)

Multi-signature addresses provide an added layer of security by requiring more than one key to authorize a transaction.


Network

A network refers to all nodes in the operation of a blockchain at any given moment in time.

No-coiner

A no-coiner is someone who has no cryptocurrency in his or her investment portfolio and firmly believes that cryptocurrency in general will fail.

Node

A copy of the ledger operated by a participant of the blockchain network.

Non-custodial

Usually referring to the storage of keys, in relation to wallets or exchanges, a non-custodial setup is one in which private keys are held by the user directly.

Nonce

When a transaction is hashed by a miner, an arbitrary number meant to be used only once is generated, called a nonce.


Off-Ledger Currency

A currency that is created (minted) outside of the specified blockchain ledger but is accepted or used.

Offline Storage

The act of storing cryptocurrencies in devices or systems not connected to the internet.

On-Ledger Currency

A currency that is both minted on the blockchain ledger and also used on the blockchain ledger, such as bitcoin.

One Cancels The Other Order (OCO)

A situation where two orders for cryptocurrency are placed simultaneously, with a rule in place to enforce that if one is accepted, the other is cancelled.

Online Storage

The act of storing cryptocurrencies in devices or systems connected to the internet. Online storage offers more convenience but also increased risk of theft.

Open Source

Open-source software is a type of software released under a license in which the copyright holder grants users the rights to study, change, and distribute the software to anyone and for any purpose. It is also a philosophy, with participants believing in the free and open sharing of information in pursuit of the greater common good.

Open/Close

The price at which a cryptocurrency opens at a time period, for example at the start of the day; the price at which a cryptocurrency closes at a time period, for example at the end of the day. In general, these terms were more useful in traditional financial markets as there are fixed hours of the day in which trading occurs.

Option

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price. There are American and European options, the former of which may be exercised at any time before expiration, and the latter exercised only at the expiration date.

Options Market

A public market for options, giving the buyer an option to buy or sell a cryptocurrency at a specific strike price, on or before a specific date.

Oracles

An agent that finds and verifies information, bridging the real world and the blockchain by providing data to smart contracts for execution of said contracts under specified conditions.

Orphan

A valid block on the blockchain that is not part of the main chain. They may come into existence when two miners produce blocks at similar times, or caused by an attacker attempting to reverse transactions. This is sometimes also known as a “detached block”.

Over The Counter (OTC)

Over The Counter is defined as a transaction made outside of an exchange, often peer-to-peer through private trades. In jurisdictions where exchanges are disallowed or where amounts traded will move the markets, traders will go through the OTC route.

Overbought

When a cryptocurrency has been purchased by more and more investors over time, with its price increasing for an extended period of time. When this happens without any justifiable reason, the cryptocurrency is considered overbought, and a period of selling is expected.

Oversold

When a cryptocurrency has been sold by more and more investors over time, with its price decreasing for an extended period of time. When this happens without any justifiable reason, the cryptocurrency is considered oversold, and a period of buying is expected.


Pair

Trade between one cryptocurrency and another, for example, the trading pair: BTC/ETH.

Paper Wallet

A physical document containing your private key or seed phrase.

Peer to Peer (P2P)

The decentralized interactions between parties in a distributed network, partitioning tasks or workloads between peers.

Permissioned Ledger

A ledger designed with restrictions, such that only people or organizations requiring access have permission to access it.

Platform

Platform refers to the parent blockchain of tokens. It may also refer to a cryptocurrency exchange on which you may trade cryptocurrencies.

Portfolio

A collection of cryptocurrencies or crypto assets held by an investment company, hedge fund, financial institution or individual.

Pre-mine

When some or all of a coin’s initial supply is generated during or before the public launch, rather than being generated over time through mining or inflation. They may be used for legitimate purposes, such as crowdfunding or marketing.

Pre-sale

A sale that takes place before an ICO is made available to the general public for funding.

Private Key / Secret Key

A piece of code generated in asymmetric-key encryption process, paired with a public key, to be used in decrypting information hashed with the public key.

Proof-of-Authority (PoA)

A blockchain consensus mechanism that delivers comparatively fast transactions using identity as a stake.

Proof-of-Burn (PoB)

A blockchain consensus mechanism aiming to bootstrap one blockchain to another with increased energy efficiency, by verifying that a cost was incurred in “burning” a coin by sending it to an unspendable address.

Proof-of-Developer (PoD)

Any verification that provides evidence of a real, living software developer who created a cryptocurrency, in order to prevent an anonymous developer from making away with any raised funds without delivering a working model.

Proof-of-Stake (PoS)

A blockchain consensus mechanism involving choosing the creator of the next block via various combinations of random selection and wealth or age of staked coins or tokens.

Proof-of-Work (PoW)

A blockchain consensus mechanism involving solving of computationally intensive puzzles to validate transactions and create new blocks

Protocol

The set of rules that define interactions on a network, usually involving consensus, transaction validation, and network participation on a blockchain.

Pseudonymous

Writing under a false name, such as “Satoshi Nakamoto”.

Public Address

A public address is the cryptographic hash of a public key, allowing the user to use it as an address to request for payment.

Public Blockchain

A blockchain that can be accessed by anyone.

Public key

This value does not have to be kept secret because the public key reveals nothing about the private key.

Pump and Dump (P&D) Scheme

A form of securities fraud involving the artificial inflation of the price of a cryptocurrency with false and misleading positive statements in order to sell previously-cheaply purchased stock at a higher price.


QR Code

A machine-readable label that shows information encoded into a graphical black-and-white pattern. For cryptocurrencies, it is often used to easily share wallet addresses with others.


Raiden Network

An off-chain scaling solution aiming to enable near-instant, low-fee and scalable payments on the Ethereum blockchain. It is similar to Bitcoin's proposed Lightning Network.

Rank

The relative position of a cryptocurrency by market capitalization.

REKT

A shorthand slang for “wrecked”, describing a bad loss in a trade.

Relative Strength Index (RSI)

A form of technical analysis that serves as a momentum oscillator, measuring the speed and change of price movements, developed by J. Welles Wilder. It oscillates between zero and 100, where a cryptocurrency is considered overbought when the indicator is above 70 and oversold when below 30.

Replicated Ledger

A copy of a distributed ledger in a network that is distributed to all participants in a cryptocurrency network.

Reverse Indicator

A person whom you may use as an indicator of how not to place buy or sell orders because they are always wrong at predicting price movements of cryptocurrencies.

Ring Signature

A method of increasing privacy, by fusing inputs of multiple signers with that of the original sender to authorize a transaction.

ROI

Short for “Return on Investment”, the ratio between the net profit and cost of investing.


Satoshi (SATS)

The smallest unit of bitcoin with a value of 0.00000001 BTC.

Satoshi Nakamoto

The individual or group of individuals that created Bitcoin. The identity of Satoshi Nakamoto has never been confirmed.

Scrypt

An alternative Proof-of Work (PoW) algorithm to SHA-256, used in Bitcoin mining. Scrypt mining relies more heavily on memory than on pure CPU power, aiming to reduce the advantage that ASICs have and hence increasing network participation and energy efficiency.

Second-Layer Solutions

A set of solutions built on top of a public blockchain to extend its scalability and efficiency, especially for micro-transactions or actions. Examples include: Plasma, TrueBit, Lightning Network, and more.

Securities and Exchange Commission (SEC)

An independent agency of the United States federal government, responsible for enforcing federal securities laws, proposing securities rules, and regulating the securities industry, the nation's stock and options exchanges, and other related activities and organizations.

Seed Phrase

Seed phrase is a single starting point when deriving keys for a deterministic wallet. It is usually presented as a series of words to enable the owner to quickly backup or restore a wallet.

Segregated Witness (SegWit)

A Bitcoin Improvement Proposal (BIP) that aimed to fix transaction malleability on Bitcoin. In the past, when changing the “witness” information (signatures) on blocks, it would change the transaction ID and its subsequent hash; SegWit was aiming to fix this by segregating signature and block content; a side effect of this change was smaller block sizes and the ability to support second layer solutions.

Selfish Mining

A situation in which a miner mines a new block but does not broadcast this new block to the other miners. If this miner is able to find a second block faster than all other miners, then they would have created the longest public chain, invalidating all other blocks discovered in the time it took to execute this attack.

Sell Wall

A situation where a large limit order has been placed to sell when a cryptocurrency reaches a certain value. This can sometimes be used by traders to create a certain impression in the market, preventing a cryptocurrency from rising above that value, as supply will likely outstrip demand when the order is executed.

SHA-256

A cryptographic hash function that generates a 256-bit signature for a text, used in Bitcoin Proof-of-Work (PoW). Standing for “Secure Hash Algorithm”, it is one of the SHA-2 algorithms, first designed by the NSA.

Sharding

Sharding is a scaling approach that enables splitting of blockchain states into partitions containing states and transaction history so that each shard can be processed in parallel.

Shiba Token

Shiba token is a Decentralized Meme Tokens, that grow into a vibrant ecosystem. SHIB is an experiment in decentralized spontaneous community building.

Shilling

The act of enthusiastically promoting a cryptocurrency or ICO project.

Shitcoin

A coin with no obvious potential value or usage.

Short

A trading technique in which a trader borrows an asset in order to sell it, with the expectation that the price will continue to decline. In the event that the price does decline, the short seller will then buy the asset at this lower price in order to return it to the lender of the asset, making the difference in profit.

Side Chain

A blockchain ledger that runs in parallel to a primary blockchain, where there is a two-way link between the primary chain and sidechain. This allows the sidechain to operate independently of the primary blockchain, using their own protocols or ledger mechanisms.

Silk Road

An online black market that existed on the dark web, now shut down by the FBI. It had accepted bitcoins for transactions.

Simplified Payment Verification (SPV)

A lightweight client to verify blockchain transactions, downloading only block headers and requesting proof of inclusion to the blockchain in the Merkle Tree.

Smart contract

A smart contract is a computer protocol intended to facilitate, verify, or enforce a contract on the blockchain without third parties.

Soft Cap

The minimum amount that an initial coin offering (ICO) wants to raise. Sometimes, if the ICO is unable to raise the soft cap amount, it may be called off entirely.

Soft Fork (Blockchain)

A protocol upgrade where only previously valid transactions are made invalid, with most soft forks requiring miners to upgrade their mining software in order to enforce it.

Solidity

The programming language used by Ethereum for developing smart contracts.

Spot

A contract or transaction buying or selling a cryptocurrency for immediate settlement, or payment and delivery, of the cryptocurrency on the market.

Spot Market

A public market in which cryptocurrencies are traded for immediate settlement. It contrasts with a futures market, in which settlement is due at a later date.

Stablecoin

A cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency.

Staking

Participation in a Proof-of-Stake (PoS) system to put your tokens in to serve as a validator to the blockchain and receive rewards.

Stale Block

A block which was successfully mined but not included on the current longest blockchain, usually because another block at the same height was added to the chain first.

State Channel

A second-layer scaling solution that reduces the total on-chain transactions necessary, moving the transactions off-chain and letting participants sign to the main chain after multiple off-chain transactions.

Symbol

The ticker of a cryptocurrency; for example, Bitcoin’s symbol is BTC.


Taint

The percentage of cryptocurrency in an account that can be traced to another account.

Tangle

The Tangle is a blockchain alternative developed by IOTA, using directed acyclic graphs which only builds in one single direction and in a way that it never repeats, and is quantum-computing resistant.

Technical Analysis / Trend Analysis (TA)

An evaluation method involving statistical analyses of market activity, such as price and volume. Charts and other tools are used to identify patterns to underpin and drive investment decisions.

Testnet

An alternative blockchain used by developers for testing.

Tether

The Tether is often abbreviated as USDT on exchanges. This is a non-government regulated ‘stablecoin’ with a value of around 1 US dollar. The company behind this coin claims that every Tether in circulation is covered with real dollars on their bank account.

Think Long Term (TLT)

A mindset where you have a longer-term investment horizon of months to years.

This is Gentlemen

Originally an error in writing the full “This is it, gentlemen”. It is now used as an introduction for good news.

Ticker

An abbreviation used to uniquely identify cryptocurrencies.

Timelock / Locktime

A condition for a transaction to only be processed at a certain time or block on the blockchain.

Timestamp

A form of identification for when a certain transaction occurred, usually with date and time of day and accurate to fractions of a second.

Token

A digital unit designed with utility in mind, providing access and use of a larger cryptoeconomic system. It does not have store of value on its own, but are made so that software can be developed around it.

Token Generation Event

The time at which a token is issued.

Tokenize

The process by which real-world assets are turned into something of digital value called a token, often subsequently able to offer ownership of parts of this asset to different owners.

Tor

Tor is free software for enabling anonymous communication. The name is derived from an acronym for the original software project name "The Onion Router". It consists of a network of volunteer relays to conceal users’ location and usage.

Total Supply

The total amount of coins in existence right now, minus any coins that have been verifiably burned.

Trade Volume

Is the amount of the cryptocurrency that has been traded in the last 24 hours.

Trading Bot

A trading bot is an algorithm that trades for a trader on a stock exchange or crypto exchange. Trading bots are used by both professionals and amateurs.

Transaction (TX)

The act of exchanging cryptocurrencies on a blockchain.

Transaction Fee

A payment for using the blockchain to transact.

Trezor

The Trezor is a popular ‘Hardware Wallet’, which supports multiple blockchains.

Trustless

A property of the blockchain, where no participant needs to trust any other participant for transactions to be enforced as intended.

Tumbler

Another name for a mixing service.

Turing-Complete

Turing-complete refers to the ability of a machine to perform calculations that any other programmable computer is capable of. An example of this is the Ethereum Virtual Machine (EVM).


uBTC

u฿ or uBTC are MilliBitcoin. 1 uBTC is equal to 0.000001 Bitcoin "BTC".

Unconfirmed

A state in which a transaction has not been appended to the blockchain.

Unpermissioned Ledger

A public blockchain.

Unspent Transaction Output

An output of a blockchain transaction that has not been spent, and can be used as an input for new transactions.

USDT

See Tether for the meaning of USDT.

UTC Time

Coordinated Universal Time. It is the primary time standard by which the world regulates clocks and time, kept using highly precise atomic clocks combined with the Earth’s rotation.

UXTO

UXTO is the abbreviation of ‘Unspent Transaction Output’. The total balance of bitcoins on an address can be spread over multiple blocks in the blockchain. The unspent bitcoins have a UXTO attribute. By searching the blockchain for the UXTO’s, which belong to a ‘wallet’ address, the total spendable balance can be determined. This is displayed by the wallet when it is fully synchronised.


Validator

A participant on a Proof-of-Stake (PoS) blockchain, involved in validating blocks for rewards.

Vanity Address

A cryptocurrency public address with custom letters and numbers, usually picked by its owner.

Vaporware

A cryptocurrency project that is never actually developed.

Vaporware (aka Vapourware)

Vaporware is a term that comes from the software world to indicate announced, but not released or cancelled software. In the cryptocurrency world this also happens, but the term “Shitcoin” is more common.

Venture Capital

A form of private equity provided to fund small, early-stage firms considered to have high growth potential.

Virgin Bitcoin

A bitcoin that has never been spent.

Vitalik Buterin

Vitalik Buterin is a programmer of Canadian-Russian descent. He is the inventor of ‘Smart Contracts’ and co-founder of Ethereum.

Volatility

A statistical measure of dispersion of returns, measured by using the standard deviation or variance between returns from that same security or market index.

Volume

The amount of cryptocurrency that has been traded during a certain period of time, such as the last 24 hours or more. Volume can show the direction and movement of the cryptocurrency as well as a prediction of future price and its demand.


Wallet

A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency, and are divided into two categories: hosted wallets and cold wallets.

Wash Trade

A form of market manipulation in which investors create artificial activity in the marketplace by simultaneously selling and buying the same cryptocurrencies.

Watchlist

A watchlist is a feature of the website where users can create their own lists of cryptocurrencies to follow. Alternative definition: A watchlist is a set of pages a user has selected to monitor for changes.
Weak Hands
An investor prone to panic selling at the first sign of a price decline.

Wei

The smallest fraction of an Ether, with each Ether to 1000000000000000000 Wei.

When Lambo

The extended-expression for Lambo.

When Moon

The extended-expression for Moon.

Whitelist

A “Whitelist” is a list of approved participants, who may participate in an ICO or Pre-ICO. A ‘whitelist’ is not always used, but it is usually used to generate ‘hype’ and exclusivity for the ICO.

Whitepaper

A document prepared by an ICO project team to interest investors with its vision, cryptocurrency use and cryptoeconomic design, technical information, and a roadmap for how it plans to grow and succeed.


XBT

XBT is an alternative abbreviation for Bitcoin (BTC) and is the official ISO 4217 standard. It is country independent. The abbreviation for gold is XAU.
Yellowpaper
A ‘yellowpaper’ is a research document. It describes a more in-depth and technical analysis. The purpose of this document is to inform those involved and interested.


YTD

Stands for Year to Date.
Zero Confirmation Transaction
Alternative phrasing for an unconfirmed transaction.
Zero Knowledge Proof
In cryptography, a zero-knowledge proof enables one party to provide evidence that a transaction or event happened without revealing private details of that transaction or event.


Zerocoin (protocol)

Zerocoin, also known as Zerocoin protocol, is originally a proposal to give Bitcoin a privacy function. It is currently implemented by, among others, the coins Zcoin and PivX. Read more about this in this detailed description of zerocoin.

FOREX BASICS


What is forex trading?

Also known as foreign exchange or currency trading, forex is one of the most traded markets in the world. In forex trading, traders hope to generate a profit by speculating on the value of one currency compared to another. This is why currencies are always traded in pairs—the value of one unit of currency doesn’t change unless it’s compared to another currency

 

Two trade opportunities

SCENARIO 1: BUY TRADE If you believe the current value of the euro is strengthening against the US dollar, you might enter a trade to buy euros in the hopes that the currency’s value will become stronger compared to the US dollar. In this scenario, you think the euro is bullish (and the US dollar is bearish).

 

SCENARIO 2: SELL TRADE Conversely, if you think the current value of the euro will weaken against the US dollar, you might enter a trade to sell euros in the hopes that the currency’s value will become weaker compared to the US dollar. In this scenario, you think the euro is bearish (and the US dollar is bullish).

 

WHAT YOU SHOULD KNOW: The buy or sell action you take to enter a trade always applies to the base currency. The opposite action automatically applies to the quote currency. So, if you buy the EUR/USD, this means you’re buying euros and selling US dollars. If you sell the EUR/USD, you’re selling euros and buying US dollars.

 

WHAT IS A PIP?

Typically in forex, currency pairs display their prices with four decimal points. A few, such as those that involve the Japanese yen, display two decimal places. No matter what currency pair you’re trading, the last large number behind the decimal always represents a pip, the main unit price that can change for the currency pair. As you trade, you’ll track your profits (or losses) in pips.

 

WHAT IS A LOT?

In forex, a lot is a standard unit of measurement. At most forex dealers, one standard lot usually equals 100,000 units of currency.

 

WHAT IS LEVERAGE?

One of the benefits of this market is the ability to trade on leverage. You don’t need $10,000 in your account to trade the EUR/USD. Currency pairs can have a leverage ratio of up to 50:1. This means you can control a large position ($10,000) with a small amount of money ($250). Many traders find the leverage that most forex dealers offer very appealing. Nonetheless, you should know that trading this way can also be risky. It can produce substantial profits as easily as it can cause substantial losses.

FUNDAMENTAL ANALYSIS


What Is Fundamental Analysis

Fundamental Analysis is a broad term that describes the act of trading based purely on global aspects that influence supply and demand of currencies, commodities, and equities. Many traders will use both fundamental and technical methods to determine when and where to place trades, but they also tend to favor one over the other. However, if you would like to use only fundamental analysis, there are a variety of sources to base your opinion.

Central Banks

Central banks are likely one of the most volatile sources for fundamental trading. The list of actions they can take is vast; they can raise interest rates, lower them (even into negative territory), keep them the same, suggest their stance will change soon, introduce non-traditional policies, intervene for themselves or others, or even revalue their currency. Fundamental analysis of central banks is often a process of poring through statements and speeches by central bankers along with attempting to think like them to predict their next move.

Economic Releases

Trading economic releases can be a very tenuous and unpredictable challenge. Many of the greatest minds at the major investment banks around the world have a difficult time predicting exactly what an economic release will ultimately end up being. They have models that take many different aspects into account, but can still be embarrassingly wrong in their predictions; hence the reason that markets move so violently after important economic releases. Many investors tend to go with the “consensus” of those experts, and typically markets will move in the direction of the consensus prediction before the release. If the consensus fails to predict the final result, the market then usually moves in the direction of the actual result – meaning that if it was better than consensus, a positive reaction unfolds and vice versa for a less-than-consensus result. The trick to trading the fundamental aspect of economic releases is to determine when you want to make your commitment. Do you trade before or after the figure is released? Both have their merits and their detractions. If you trade well before the release, you can try to take advantage of the flow toward the consensus expectation, but other fundamental events around the world can impact the market more than the consensus read. Trading moments before the economic release means that you have an opinion on whether the actual release will be better or worse than the consensus, but you could be dreadfully wrong and risk large losses on essentially a coin flip. Trading moments after the economic release means that you will be trying to establish a position in a low-volume market which presents the challenge of getting your desired price.

Geopolitical Tensions

Like it or not, some countries around the world don’t get along very nicely with each other or the global community and conflicts or wars are sometimes imminent. These tensions or conflicts can have an adverse impact on tradable goods by changing the supply or even the demand for certain products. For instance, increased conflict in the Middle East can put a strain on the supply of oil which then makes the price increase. Conversely, a relative calm in that part of the world can decrease the price of oil as supply isn’t threatened. Being able to properly predict how these events will conclude may be a way to get ahead of the market with your fundamental perspective.

Weather

There are a variety of weather-related events that can cause prices to fluctuate. The easiest example is the propensity for winter to create massive snow storms that can drive up the cost of natural gas, which is used to heat homes. However, there are a variety of other weather situations that can change the value of tradable goods such as hurricanes, droughts, floods, and even tornados. While some of these events are very unpredictable, sometimes it can help to break out the old Farmer’s Almanac or pay close attention to the Weather Channel to see how weather patterns might unfold.

Seasonality

The seasonality as related to weather is something that makes sense as the natural gas example pointed out above, but there are other seasonal factors that aren’t related to weather as well. For instance, at the end of the calendar year many investors will sell equities that have declined throughout the year in order to claim capital losses on their taxes. Sometimes it may be beneficial to exit positions before the year-end selloff begins. On the other side of that equation, investors typically come back to equities in droves in January, a phenomenon called “The January Effect.” The end of a month can be rather active as well as businesses that sell products in multiple nations look to offset their currency hedges, a practice termed “Month-End Rebalancing.”

Some fundamental factors are more long-lasting while others are more immediate, but trading them can be both difficult and rewarding for those who have the intestinal fortitude to trade them. Also, the fundamental factors listed above are just the start to a list that is much longer in length as new fundamental methods of trading are created every day. So keep your eyes open for new situations that arise and maybe you could be fundamentally ahead of the curve!

TECHNICAL ANALYSIS


Understanding Technical Analysis

Technical analysis is the study of historical price action in order to identify patterns and determine probabilities of future movements in the market through the use of technical studies, indicators, and other analysis tools.

Technical analysis boils down to two things:

  1. identifying trend
  2. identifying support/resistance through the use of price charts and/or timeframes

Markets can only do three things: move up, down, or sideways.

Prices typically move in a zigzag fashion, and as a result, price action has only two states:

  • Range – when prices zigzag sideways
  • Trend – prices either zigzag higher (up trend, or bull trend), or prices zigzag lower (down trend, or bear trend)

Why is technical analysis important?

Technical analysis of a market can help you determine not only when and where to enter a market, but much more importantly, when and where to get out.

How can you use technical analysis?

Technical analysis is based on the theory that the markets are chaotic (no one knows for sure what will happen next), but at the same time, price action is not completely random. In other words, mathematical Chaos Theory proves that within a state of chaos there are identifiable patterns that tend to repeat.

This type of chaotic behavior is observed in nature in the form of weather forecasts. For example, most traders will admit that there are no certainties when it comes to predicting exact price movements. As a result, successful trading is not about being right or wrong: it’s all about determining probabilities and taking trades when the odds are in your favor. Part of determining probabilities involves forecasting market direction and when/where to enter into a position, but equally important is determining your risk-to-reward ratio.

Remember, there is no magical combination of technical indicators that will unlock some sort of secret trading strategy. The secret of successful trading is good risk management, discipline, and the ability to control your emotions. Anyone can guess right and win every once in a while, but without risk management it is virtually impossible to remain profitable over time.

RISK MANAGEMENT


Any analyst or trading guide will tell you how important it is to manage your risk. However, how does one go about managing that risk? And what exactly do they mean by managing risk? Here is a step-by-step guide to one of the most important concepts in financial trading.

1. Determine Your Risk Tolerance

This is a personal choice for anyone who plans on trading any market. Most trading instructors will throw out numbers like 1%, 2% or on up to 5% of the total value of your account risked on each trade placed, but a lot of your comfort with these numbers is largely based on your experience level. Newer traders are inherently less sure of themselves due to their lack of knowledge and familiarity with trading overall or with a new system, so it makes sense to utilize the smaller percentage risk levels.

Once you become more comfortable with the system you are using, you may feel the urge to increase your percentage, but be cautious not to go too high. Sometimes trading methodologies can produce a string of losses, but the goal of trading is to either realize a return or maintain enough to make the next trade.

For instance, if you have a trading method that places one trade per day on average and you are risking 10% of your beginning monthly balance on each trade, it would only theoretically take 10 straight losing trades to completely drain your account. So even if you are an experienced trader, it doesn’t make much sense to risk so much on one single trade.

On the other hand, if you were to risk 2% on each trade that you place, you would theoretically have to lose 50 consecutive trades to drain your account. Which do you think is more likely: losing 10 straight trades, or losing 50?

STARTING BALANCE % RISKED ON EACH TRADE $ RISKED ON EACH TRADE # OF CONSECUTIVE LOSSES BEFORE $0
$10,000 10% $1000 10
$10,000 5% $500 20
$10,000 3% $300 33
$10,000 2% $200 50
$10,000 1% $100 100

2. Customize Your Contracts

The amounts of methodologies to use in trading are virtually endless. Some methods have you use a very specific stop loss and profit target on each trade you place while others vary greatly on the subject. For instance, if you use a strategy that calls for a 20-pip stop loss on each trade and you only trade the EUR/USD, it would be easy to figure out how many contracts you may want to enter to achieve your desired result. However, for those strategies that vary on the size of stops or even the instrument traded, figuring out the amount of contracts to enter can get a little tricky.

One of the easiest ways to make sure you are getting as close to the amount of money that you want to risk on each trade is to customize your position sizes. A standard lot in a currency trade is 100,000 units of currency, which represents $10/pip on the EUR/USD if you have the U.S. dollar (USD) as your base currency; a mini lot is 10,000.

If you wanted to risk $15 per pip on a EUR/USD trade, it would be impossible to do so with standard lots and could force you in to risking either too much or too little on the trade you place, whereas both mini and micro lots could get you to the desired amount. The same could be said about wanting to risk $12.50 per pip on a trade; both standard and mini lots fail to achieve the desired result, whereas micro lots could help you achieve it.

In the realm of trading, having the flexibility to risk what you want, when you want, could be a determining factor to your success.

3. Determine Your Timing

There may not be anything more frustrating in trading than missing a potentially successful trade simply because you weren’t available when the opportunity arose. With forex being a 24-hour-a-day market, that problem presents itself quite often, particularly if you trade smaller timeframe charts. The most logical solution to that problem would be to create or buy an automated trading robot, but that option isn’t viable for a large segment of traders who are either skeptical of the technology/source or don’t want to relinquish the controls.

That means that you have to be available to place trades when the opportunities arise, in person, and of full mind and body. Waking up at 3am to place a trade usually doesn’t qualify unless you’re used to getting only 2-3 hours of sleep. Therefore, the average person who has a job, kids, soccer practice, a social life, and a lawn that needs to be mowed needs to be a little more thoughtful about the time they want to commit. Perhaps 4-Hour, 8-Hour, or Daily charts are more amenable to that lifestyle where time may be the most valuable component to trading happiness.

Another way to manage your risk when you’re not in front of your computer is to set trailing stop orders. Trailing stops can be a vital part of any trading strategy. They allow a trade to continue to gain in value while the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a specified distance.

When the market price moves in a favorable direction (up for long positions, down for short positions), the trigger price follows the market price by the specified stop distance. If the market price moves in an unfavorable direction, the trigger price stays stationary and the distance between this price and the market price becomes smaller. If the market price continues to move in an unfavorable direction until it reaches the trigger price, an order is triggered to close the trade.

4. Avoid Weekend Gaps

Many market participants are knowledgeable of the fact that most popular markets close their doors on Friday afternoon Eastern Time in the US. Investors pack up their things for the weekend, and charts around the world freeze as if prices remain at that level until the next time they are able to be traded. However, that frozen position is a fallacy; it isn’t real. Prices are still moving to and fro based on the happenings of that particular weekend, and can move drastically from where they were on Friday until the time they are visible again after the weekend.

This can create “gaps” in the market that can actually run beyond your intended stop loss or profit target. For the latter, it would be a good thing, for the former – not so much. There is a possibility you could take a larger loss than you intended because a stop loss is executed at the best available price after the stop is triggered; which could be much worse than you planned.

While gaps aren’t necessarily common, they do occur, and can catch you off guard. As in the illustration below, the gaps can be extremely large and could jump right over a stop if it was placed somewhere within that gap. To avoid them, simply exit your trade before the weekend hits, and perhaps even look to exploit them by using a gap-trading technique.

5. Watch the News

News events can be particularly perilous for traders who are looking to manage their risk as well. Certain news events like employment, central bank decisions, or inflation reports can create abnormally large moves in the market that can create gaps like a weekend gap, but much more sudden. Just as gaps over the weekend can jump over stops or targets, the same could happen in the few seconds after a major news event. So unless you are specifically looking to take that strategic risk by placing a trade previous to the news event, trading after those volatile events is often a more risk-conscious decision.

6. Make It Affordable

There is a specific doctrine in trading that is extolled by responsible trading entities, and that is that you should never invest more than you can afford to lose. The reason that is such a widespread manifesto is that it makes sense. Trading is risky and difficult, and putting your own livelihood at risk on the machinations of market dynamics that are varied and difficult to predict is tantamount to putting all of your savings on either red or black at the roulette table of your favorite Vegas casino. So don’t gamble away your hard-earned trading account: invest it in a way that is intelligent and consistent.

So will you be a successful trader if you follow all six of these tenants for managing risk? Of course not, other factors need to be considered to help you achieve your goals. However, taking a proactive role in managing your risk can increase your likelihood for long term success.

TRADING PLAN


TRADING PLAN

Sometimes there is a misconception that you need highly evolved market knowledge and years of trading experience to be successful. However, we often see that the more information we have the more difficult it is to create a clear plan. More information tends to create hesitation and doubt, which in turn allows emotions to creep in. This can prevent you from taking a step back and looking at a situation subjectively.

If you don’t know where you are going, any road will get you there. In trading, if you don’t set out a plan for your trades and develop strategies to follow you have no way to measure your success. The vast majority of people do not trade to a plan, so it’s not a mystery why they lose money. Trading with a plan is comparable to building a business. We are never going to be able to beat the market. In general it’s not about winning or losing, it’s about being profitable overall.

Why a trading plan is important

When trading, as in most endeavors, it’s important to start at the end and work backwards to create your plan and figure out what type of trader you should be. The most successful traders trade to a plan, and may even have several plans that work together. Always write things down. Why? Because it will help you stay focused on your trading objectives, and the less judgment we have to use the better. A plan helps you maintain discipline as a trader. It should help you trade consistently, manage your emotions, and even help to improve your trading strategy. It is also important to use your plan. Many people make the mistake of spending all their time creating a plan, then never implementing it.

Key components to develop a trading plan

  1. Trading plan structure and monetary goals
  2. Research and education
  3. Strategy using fundamental and technical tools
  4. Money and risk management
  5. Timing
  6. Trade mechanics, documentation, and testing

How to build a trading plan

Make sure you do your own research and build a plan according to your needs. Find confidence in what you know. The tools you have selected for your strategy are key, from the type of chart to the specific drawing tools to even the most elaborate of strategies. Test your plan in the beginning to make sure you are on the right track. After you have begun trading, continue testing it regularly. This allows you to measure your success by clearly seeing what works and what does not work. From there you can tweak elements that might be weaker and not contributing to your overall goal. Ask yourself the following questions (The answers to these will assist you in the foundation for your trading plan and should be referred back to regularly to insure that you are on track with your plan.)

Why am I trading?

If your immediate answer is, “to make money” you should stop right there. If the only goal is to make as much money as fast as we can, we are ultimately doomed, because it’s will never be enough. Managing your losses should be your primary goal. This will create an environment in which profits can be generated.

What is your motivation?

Solid retirement? New career? Spend more time with family and friends?

Ask yourself, “What are my strengths and weaknesses?”

  • How do I maximize my strengths to minimize my weaknesses?
  • An example of a weakness is a need to constantly watch one’s trades. Is your laptop on the pillow, waking you up in the middle of the night to monitor trades? It’s really difficult to make intelligent decisions when you’re half awake.

Is the amount of money I have to trade with sensible to achieve my goals?

Look at things in percentages; remember leverage is a double-edged sword. That is why risk and money management are key.

Deciding what type of trader you are can be tough; especially since the trader you want to be can be very different from the type of trader you should be based on your behaviors and characteristics. Once you have laid out your goals, risk appetite, strengths, and weaknesses it should become apparent which type of trading fits you best. You will notice three columns in the chart; they are labeled short, base and long. Base equals the timeframe charts you spend the majority of your time, if you are not sure, this is the timeframe chart that you keep going back to. Short and long are the timeframe charts that you refer to confirming or denying what is happening in the base timeframe chart. A common mistake traders make is jumping around randomly between chart timeframes.

How to match your goals to a trading style

Once you decide what type of trader you are, you should begin to invest yourself into education and research. Make continual learning a priority, each person’s strategy or methodology is unique and cannot be duplicated. Therefore your plan is most successful when it is based on your individual needs. Evaluate your needs and the effort required. Make sure you understand why you are placing trades. An initial investment maybe monetary but will benefit you over the long-term. Time and research should be continuing investments. Research by way of following current global events and keeping up to date on current analysis tools will help educate you further on all aspects of trading. Ask yourself, “Am I a fundamental or technical trader?”

Creating a strategy using fundamental and technical tools is key, but we first need to learn a little about each of these types. Some traders choose to use fundamental analysis to assist with their trading decisions. This type of analysis is based on the news. News can be considered anything ranging from economic, political, or even environmental events. As a result, fundamental analysis is much more subjective.

Other traders may choose to use technical analysis to drive their trading decisions. This type of analysis is more definitive and relies more on the math and probabilities behind trading. The specific type of analysis used can be an indicator. They could be either leading or lagging. There are very few leading indicators available, which may give an idea of where the market is going to go. Fibonacci is the most popular, but most misused and misunderstood.

After determining some of the types of analysis you will use, it’s time to develop a trading strategy. This can be through fundamental analysis, technical analysis, or a combination of both. It is key that you develop a strategy and include it as a part of your trading plan.

A strategy is a step-by-step systematic approach to how and when we are going to use tools developing a sequence of analysis. Here is what we can expect to see in a trading strategy:

  • The types of analysis tools (fundamental, technical, or both)
  • When and how the analysis tools will be used
  • The timeframes to use the tools
  • The Sequence of analysis
  • High probability trade, description of what to look for
  • Types of orders to use

This sequence will lead us to what a high probability trade looks like visually based on the indicators and analysis we are using. Since we have what we need for our strategy, let’s take a look at the money and risk management side of trading.

Talking about money and risk management can be a difficult step for many people. Trying to determine what your risk tolerance is can be even harder. Ask yourself, “How much money do I really have to trade with?” Be honest with what is truly available to you. One mistake that people make is thinking that trading is an investing or holding activity, and keep depositing money. Trading is not a deposit and hold activity. Liquidation can and does happen when 100% of the total margin requirement of all open positions is no longer met. Those who make money may not have more winning trades than losing; they may just manage their losing trades so the winning ones make them profitable overall. It can be easier to win fewer times and still be profitable. A common characteristic of new traders is to quickly take profits but let losing trades run, consequently they have to maintain a higher risk to reward ratio.

Let’s think in terms of probability. It is helpful to use the 3% rule and always have a cushion. This is an example of the 3% rule in action: 3% on a $10,000 account is equal to $300 risk per trade. Then divide the cost of risk by the account equity, to get the number of losing trades or $10,000/$300 or 33.3 trades. These answers will help you determine if you can meet your goals. It allows you to give yourself room for flexibility. Traders limit their trading and the plan if there is not enough room for the losses. When developing your trading plan and approach it’s important to take other costs into consideration, some may have more of an impact than others, but all contribute to your investment in a trading plan. Assuming we have the right strategy decided and how much equity to risk, let’s figure out timing.

Timing when trading can be everything. When do the markets open? When do they close? What instruments (like currency pairs) am I trading? Some markets are open when others are closed or they may overlap. Here are the open and close times for some of the major markets. More volatility occurs at market opening and closings but also when reports or news are released. The beauty of trading some instruments is the ability to trade them even if the market you physically reside in is closed. The illustration below shows the overlap of markets that are open. Notice the times where more than two markets are open simultaneously. From 8am Eastern Time or 1pm GMT to 12pm Eastern Time or 5pm GMT, it displays the most markets open globally. Picking your times to trade or watch the market maybe easier since there is likely a market open somewhere in the world.

We have reviewed some of the the key components of a trading plan, now it is time to plan the actual trade, and how to stay on track.

  • A checklist is a good reminder of what you are doing (helps to set the path you choose to take, and reinforces why you are trading)
  • Your goal
  • Analysis tools
  • Amount of money to trade
  • Amount you are willing to risk (this could be per trade percent or total amount of equity amount risked at any one time)
  • Risk to reward ratio
  • Timing
  • Types of orders to use for types of trades
  • High probability trades

There is no magic combination but some things to consider when trying to increase your trade probability may help.

  • What timeframes and what instrument, like currency pairs, we are trading.
    • Being consistent with your methods.
  • Winners focus on how much money they could lose as opposed to how much they can win.
  • The most important rule: never get into a trade without first determining when you’re going to get out.
  • Don’t be fooled, a common misconception is that different time frames offer different profits. Always use stop losses. We have yet to see someone who has consistently not used stop losses and made money over time.
  • A bad practice is to go back and say, “What if?” For example, if you got out at the wrong time, your trade goes bad, and you get emotional. If you get out at the right time you become confident, maybe overly confident.
  • Know exactly what a high probability trade looks like, and only take a trade when you see one.

Documentation, this is crucial to our success. If we are not consistent in the way we apply our methodology, it is hard to go back with any degree of accuracy to see if the plan worked. We will never know for sure what the probabilities are in trading but you have a much better chance of being successful if you follow a predetermined plan. We can continue to fine tune and make the strategy as mechanical as possible, removing emotion will keep you on your path.

Before we wrap up, here is a quick review with creating a trading plan.

It’s important to answer the tough questions first, that is what will separate you from the vast majority of those losing money trading.

Make sure you are prepared, continued research and education will be your best weapon in your continued success.

 

TRADING VOLATILITY


Market volatility is a reality that, before long, every trader has to face. When the markets are moving, here are a few strategies to help you manage risk and come out on top.

1. Color between the Lines

To trade the trend, all you have to do is pretend that you are coloring between the lines. When the market gets near support, look for it to rise; if it approaches resistance, prepare for a drop. The cool thing about trending markets is that they’re so easy to spot, and it doesn’t matter which timeframe you look at! Trends can turn up just as easily in a two-minute chart as a two-hour chart. Take a look at this chart of the EUR/USD (Euro / U.S. Dollar) on a two-minute timeframe:

It’s that easy. Unfortunately, it’s not that easy to determine how many pips you look to risk or gain; that is a skill that is more determined by experience than anything else.

2. Break Out of the Mold

Like it or not, traders often act in herds. Occasionally levels will break violently as too many traders are aware of them and stop orders begin to pile up around their edges.

An alternative to trying to pick out where the market might turn around is to poach that level and trade the breakout.

The key is to find the level you are looking to exploit, set up the order before the market reaches it and keep your stops and targets within striking distance of the spikes. Sometimes that means only looking to get 15-20 pips on a currency pair that typically moves close to 100 pips per day, but if fast-paced, electric opportunities are what you seek, breakouts are rarely matched in their levels of excitement. Admittedly, breakouts tend to be a little quick and require you to be alert, but they can be great opportunities.

3. Venture a Guess

One potentially exciting and impulsive way to trade is to place trades around major economic news events. Trading news announcements can be risky due to the large moves that can follow a news release.  Therefore, you should be prepared well ahead of time.

First of all, making sure you place your trade BEFORE the news event hits is one of the vital keys in doing this successfully. You can make an educated guess as to what the market will tell you before the event is released as well as make a logical guess as to which way the market will move based on your educated assumption.

As an example, consider the event that typically creates the most movement during any given month: the U.S. release of Non-Farm Payrolls. As a general rule, the USD/JPY (U.S. Dollar / Japanese Yen) typically has the most logical reaction to major US economic releases; that is to say that if data is bad for the US, the USD/JPY goes down, and if data is good for the US it goes up.

Analysts will also publish expectations for news releases like NFP.  These are important because the market has likely priced in the expectations.  If the expectations are met then traders should not expect too large of a move. Alternatively , if the announcement is way outside of expectations, then there could be a large move. You can find expectations and upcoming news announcements on our economic calendar.

Before NFP is officially released, there are a variety of economic indicators that also measure employment and can be used as guides to making an educated guess. By aggregating these pre-NFP releases and scoring them on their previous effectiveness, one can then venture a “guess” as to what NFP will reveal.

LEADING EVENT CURRENT RELEASE PREVIOUS RELEASE GOOD OR BAD FOR NFP?
ADP Employment Change 175k 227k Bad
Initial Jobless Claims 4-Week Moving Average 333k 357.25K Good
Continuing Jobless Claims 2.991M 2.833M Bad
Challenger Job Cuts 45,107 30,623 Bad
ISM Manufacturing PMI Employment Subcomponent 52.3 56.5 Bad
Markit Manufacturing PMI Employment Subcomponent 53.2 54.0 Bad
Markit Services PMI Employment Subcomponent 54.1 55.2 Bad
SM Non-Manufacturing PMI Employment Subcomponent 56.4 55.6 Good
Chicago PMI Employment Subcomponent Weakened for 2nd straignt month Lowest since April 2013 Bad
Chicago PMI Employment Subcomponent 60.7 55.1 Good
Overall Bad

Since the educated guess calculated a bad result, the logical assumption would be to sell USD/JPY before the release. Of course, it is vital to use stops and targets as managing a wrong guess is paramount to saving the balance of your account. As you can see from the chart below, predicting a bad result would have been a pretty good guess.

The NFP report isn’t the only one that can be utilized in this fashion either. For instance, you could pull together Consumer Confidence data to guess what US Retail Sales might be, or compile inflationary data to guess the tone of a central bank’s monetary policy decision. The possibilities are endless.

4. Fill “The Gap”

Every Friday afternoon at 5pm Eastern Time, the forex market closes for the weekend. However, the lack of movement on your trading screen is an illusion; the market is still moving. Prices continue to revalue themselves based on what is happening around the world even when markets are closed; you just don’t see that movement until Sunday at 5pm Eastern Time. This results in a “market gap.”

One very simple way to trade volatility would be to look for these gaps that occur over the weekend and attempt to trade them. Just like any strategy to trade, it doesn’t work every time, so be sure place your stops and targets at reasonable levels.

For instance, let’s assume China released some data over the weekend while markets were closed that showed that their economy was contracting more than most expected. The typical reaction to this type of news would be for currencies of nations that are heavily reliant on trade with the Asian Giant to depreciate, the AUD being chief among them. Since the markets are closed though, you don’t see that movement until Sunday at 5pm Eastern Time when the forex market opens for business for the week.

What is left behind is what is called a “market gap.” It is a region on your chart where a candle (or bar) jumps from one price to a completely unrelated price with nothing in between. Then, as if on cue, the market sometimes ambles its way back to the price that it closed at on Friday. This is called “closing (or filling) the gap.”

Conclusion

Simply put, there are many ways for you to have an exciting time trading the market. While every methodology laid out here has its merits, they also have their potential for unmitigated disaster. Being laser-focused on managing risk and making sure that your spontaneity doesn’t turn to recklessness is a vital component to trading for the long term.

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