Introduction
Cryptocurrency trading involves buying, selling, and exchanging digital currencies on specialized platforms. This rapidly evolving market has developed its own unique terminology that combines traditional finance concepts with blockchain-specific jargon. Understanding these terms is essential for anyone looking to navigate the crypto markets effectively, manage risk, and communicate with other traders. This cheat sheet provides a comprehensive guide to the most important crypto trading terminology.
Core Crypto Trading Concepts
Cryptocurrency Fundamentals
| Term | Definition |
|---|---|
| Cryptocurrency | Digital or virtual currency that uses cryptography for security and operates on a decentralized network (blockchain) |
| Blockchain | Distributed digital ledger that records all transactions across a network of computers |
| Token | Digital asset issued on an existing blockchain (e.g., ERC-20 tokens on Ethereum) |
| Coin | Digital currency with its own independent blockchain (e.g., Bitcoin, Ethereum) |
| Mining | Process of validating transactions and adding them to the blockchain through computational work |
| Staking | Locking up crypto assets to support network operations and earn rewards |
| Wallet | Software or hardware that stores private keys to access cryptocurrency holdings |
| Private Key | Secret code that allows access and control of cryptocurrency in a wallet |
| Public Key | Cryptographic code derived from a private key that serves as a receiving address |
| DeFi | Decentralized Finance; financial services built on blockchain without centralized intermediaries |
| Smart Contract | Self-executing code on a blockchain that automatically implements terms of an agreement |
Market Structure Terms
| Term | Definition |
|---|---|
| Market Cap | Total value of a cryptocurrency (price × circulating supply) |
| Circulating Supply | Number of coins currently available and in public hands |
| Total Supply | Total amount of coins in existence, including locked/reserved coins |
| Max Supply | Maximum number of coins that will ever exist for a cryptocurrency |
| Volume | Total amount of a cryptocurrency traded in a given time period |
| Liquidity | Ease with which an asset can be bought or sold without affecting price |
| Order Book | Record of all buy and sell orders for a specific market, organized by price |
| Bid | Price a buyer is willing to pay for a cryptocurrency |
| Ask | Price a seller is willing to accept for a cryptocurrency |
| Spread | Difference between the lowest ask price and highest bid price |
Trading Order Types
| Order Type | Description | Best Used When |
|---|---|---|
| Market Order | Buy/sell immediately at current market price | Need immediate execution; liquidity is good |
| Limit Order | Buy/sell at a specified price or better | Want specific entry/exit price; no rush |
| Stop Order | Market order triggered when price reaches stop level | Limiting losses or protecting profits |
| Stop-Limit Order | Limit order triggered when price reaches stop level | Want control over execution price when triggered |
| OCO (One Cancels Other) | Pair of orders where execution of one cancels the other | Setting both take-profit and stop-loss levels |
| Trailing Stop | Stop order that moves with favorable price movements | Protecting profits while letting them grow |
| Iceberg Order | Large order split into smaller visible portions | Trading large amounts without market impact |
| Fill or Kill (FOK) | Order must be filled completely immediately or canceled | Need all-or-nothing execution |
| Immediate or Cancel (IOC) | Fills what’s possible immediately, cancels the rest | Partial fill acceptable but no waiting |
| Good Till Canceled (GTC) | Order remains active until manually canceled | Long-term price targets |
| Time-in-Force (TIF) | Order valid for a specified time period | Trading within specific timeframes |
Trading Strategies and Techniques
Basic Trading Approaches
| Strategy | Description | Risk Level |
|---|---|---|
| HODL | Buy and hold long-term, regardless of market fluctuations | Moderate |
| Day Trading | Open and close positions within the same day | High |
| Swing Trading | Hold positions for days or weeks to capture price “swings” | Medium-High |
| Position Trading | Hold positions for months or years based on long-term trends | Medium |
| Scalping | Make many small trades to profit from minor price movements | Very High |
| Arbitrage | Exploit price differences between exchanges or pairs | Low-Medium |
| Grid Trading | Place buy and sell orders at regular intervals around a price | Medium |
| Dollar-Cost Averaging | Invest fixed amounts at regular intervals regardless of price | Low |
| Margin Trading | Trading with borrowed funds to amplify potential returns | Very High |
| Copy Trading | Automatically copy trades of successful traders | Varies |
Technical Analysis Terms
| Term | Definition |
|---|---|
| Support | Price level where downtrend may pause due to buying interest |
| Resistance | Price level where uptrend may pause due to selling pressure |
| Trend Line | Line connecting successive highs or lows in a price chart |
| Moving Average (MA) | Average price over a specific period, smooths price data |
| Relative Strength Index (RSI) | Momentum oscillator measuring speed and change of price movements |
| MACD | Trend-following momentum indicator showing relationship between two moving averages |
| Bollinger Bands | Volatility bands placed above and below a moving average |
| Volume | Number of coins traded during a specific period |
| Fibonacci Retracement | Potential support/resistance levels based on Fibonacci ratios |
| Chart Pattern | Recognizable pattern in price charts suggesting future price movement |
| Indicator | Statistical calculation based on price/volume used to forecast price direction |
| Oscillator | Indicator that fluctuates between two extreme values showing overbought/oversold conditions |
| Divergence | When price and indicator move in opposite directions |
Candlestick Chart Patterns
| Pattern | Signals | Description |
|---|---|---|
| Doji | Indecision | Open and close prices are very close or identical |
| Hammer | Potential reversal | Small body with long lower shadow at bottom of downtrend |
| Shooting Star | Potential reversal | Small body with long upper shadow at top of uptrend |
| Engulfing | Reversal | Candle completely engulfs previous candle in opposite direction |
| Morning Star | Bullish reversal | Three-candle pattern at bottom of downtrend |
| Evening Star | Bearish reversal | Three-candle pattern at top of uptrend |
| Harami | Reversal warning | Small candle completely contained within previous larger candle |
| Three Black Crows | Bearish continuation | Three consecutive declining candles in downtrend |
| Three White Soldiers | Bullish continuation | Three consecutive rising candles in uptrend |
Market Sentiment and Behavior
| Term | Definition |
|---|---|
| FOMO | Fear Of Missing Out; rushing to buy due to rising prices |
| FUD | Fear, Uncertainty, and Doubt; negative information causing selling |
| DYOR | Do Your Own Research; reminder to verify information independently |
| Bagholder | Investor holding cryptocurrency that has significantly decreased in value |
| Whale | Individual or entity holding large amounts of cryptocurrency |
| Bull Market | Market characterized by rising prices and optimism |
| Bear Market | Market characterized by falling prices and pessimism |
| ATH | All-Time High; highest price ever reached |
| ATL | All-Time Low; lowest price ever reached |
| Dead Cat Bounce | Temporary recovery in price during a downtrend |
| Golden Cross | Short-term MA crosses above long-term MA (bullish signal) |
| Death Cross | Short-term MA crosses below long-term MA (bearish signal) |
| Pump and Dump | Artificially inflating price before selling at a profit |
| Market Cycle | Recurring pattern of market phases (accumulation, mark-up, distribution, mark-down) |
Exchange and Trading Platform Terms
| Term | Definition |
|---|---|
| CEX | Centralized Exchange; platform operated by a company (e.g., Binance, Coinbase) |
| DEX | Decentralized Exchange; peer-to-peer exchange without central authority |
| KYC | Know Your Customer; identity verification process required by many exchanges |
| API | Application Programming Interface; allows automated trading |
| Spot Trading | Buying/selling for immediate delivery |
| Futures | Contract to buy/sell at a predetermined price at a specific future date |
| Perpetual Futures | Futures contracts with no expiry date |
| Options | Right (not obligation) to buy/sell at a predetermined price before expiration |
| Margin | Borrowed funds used to increase trading position size |
| Leverage | Multiplier that increases exposure beyond your capital (e.g., 10x) |
| Liquidation | Forced closing of a leveraged position due to insufficient margin |
| Funding Rate | Periodic payment between long and short positions in perpetual futures |
| Maker | Trader who adds liquidity by placing limit orders that don’t execute immediately |
| Taker | Trader who removes liquidity by placing orders that execute immediately |
| Trading Fee | Cost charged by exchange for executing trades |
| Slippage | Difference between expected price and execution price of a trade |
Common Trading Metrics and Calculations
Performance Metrics
| Metric | Formula | Description |
|---|---|---|
| ROI (Return on Investment) | (Current Value – Initial Value) / Initial Value × 100% | Percentage gain or loss on investment |
| Drawdown | (Peak Value – Lowest Value) / Peak Value × 100% | Measure of decline from peak to trough |
| Sharpe Ratio | (Return – Risk-Free Rate) / Standard Deviation | Risk-adjusted return measurement |
| Win Rate | (Winning Trades / Total Trades) × 100% | Percentage of profitable trades |
| Risk/Reward Ratio | Potential Profit / Potential Loss | Comparison of potential gain vs. risk |
Position Sizing and Risk Management
| Term | Formula/Description |
|---|---|
| Position Size | Amount of capital allocated to a single trade |
| Risk Per Trade | Percentage of capital risked on a single trade (typically 1-2%) |
| Stop-Loss Placement | Price level where trade will be closed to limit losses |
| Take-Profit Level | Price target where profits will be realized |
| Risk Management | Strategies to protect capital and manage potential losses |
| Diversification | Spreading investments across different assets to reduce risk |
| Correlation | Statistical measure of how assets move in relation to each other |
Step-by-Step Trading Process
Market Research
- Analyze fundamental factors affecting the cryptocurrency
- Review technical indicators and price patterns
- Assess overall market conditions and sentiment
Strategy Development
- Define entry and exit criteria
- Determine position sizing and risk parameters
- Select appropriate order types
Trade Execution
- Place orders according to strategy
- Monitor execution and adjust if necessary
- Record trade details for later analysis
Position Management
- Set stop-loss and take-profit levels
- Monitor market conditions for changes
- Adjust position as needed based on new information
Trade Closure
- Execute exit according to strategy
- Capture profits or limit losses
- Record final results
Performance Analysis
- Calculate trade metrics (ROI, risk/reward)
- Identify strengths and weaknesses
- Refine strategy based on results
Common Challenges and Solutions
| Challenge | Solution |
|---|---|
| Volatility | Use stop-losses, position sizing, and diversification to manage risk |
| Emotional Trading | Follow a trading plan and use systematic approaches to reduce emotional decisions |
| Information Overload | Focus on key indicators and reliable sources; use filtering tools |
| Market Manipulation | Be aware of low-liquidity markets; avoid FOMO and recognize pump-and-dump schemes |
| Security Risks | Use hardware wallets, 2FA, and only trusted exchanges |
| Tax Complexity | Keep detailed records of all trades; consult with crypto tax specialists |
| Regulatory Uncertainty | Stay informed on regulations in your jurisdiction; comply with local laws |
| Technical Failures | Have backup trading methods; don’t rely on a single exchange or tool |
Best Practices for Crypto Traders
Risk Management
- Never risk more than you can afford to lose
- Limit position sizes to 1-2% of total capital per trade
- Use stop-losses consistently
- Diversify across multiple cryptocurrencies
Trading Psychology
- Develop and stick to a trading plan
- Keep emotions separate from trading decisions
- Accept losses as part of the process
- Maintain realistic expectations
Technical Approach
- Use multiple timeframes for analysis
- Combine different indicators for confirmation
- Look for confluence of signals
- Understand the limitations of technical analysis
Security Practices
- Use hardware wallets for long-term holdings
- Enable two-factor authentication (2FA)
- Use unique, strong passwords for each platform
- Be vigilant about phishing attempts
Continuous Learning
- Maintain a trading journal to track performance
- Analyze both winning and losing trades
- Stay updated on market developments
- Regularly review and update your trading strategy
Resources for Further Learning
Books
- “Cryptoassets: The Innovative Investor’s Guide” by Chris Burniske and Jack Tatar
- “Technical Analysis of the Financial Markets” by John J. Murphy
- “Trading in the Zone” by Mark Douglas
- “The Crypto Trader” by Glen Goodman
Online Courses
- Cryptocurrency Trading Basics (Coinbase Learn)
- Technical Analysis Masterclass (Udemy)
- Blockchain and Bitcoin Fundamentals (Udemy)
- Professional Trading Masterclass (Trading View)
Websites and Tools
- CoinMarketCap/CoinGecko – Market data and coin information
- TradingView – Charting and technical analysis
- Glassnode/CryptoQuant – On-chain analytics
- CoinDesk/The Block – Crypto news and research
- Crypto Fear & Greed Index – Market sentiment indicator
Communities
- Reddit (r/CryptoCurrency, r/BitcoinMarkets)
- Twitter Crypto Community
- Discord/Telegram trading groups (verify reputation first)
- Local crypto meetups and conferences
Crypto Regulatory Considerations by Region
| Region | Key Considerations |
|---|---|
| United States | SEC regulations on securities, IRS tax reporting, state-by-state licenses |
| European Union | MiCA regulations, AMLD5 compliance, VAT considerations |
| United Kingdom | FCA registration for crypto businesses, tax reporting requirements |
| Asia | Varies widely: Japan (licensed exchanges), Singapore (supportive), China (restrictive) |
| Australia | AUSTRAC registration, clear tax guidance, self-regulatory standards |
Remember that regulations evolve rapidly in the cryptocurrency space. Always verify current requirements in your jurisdiction.