12 Terms Every Crypto Trader Should Know
Ready to up your crypto trading game? Here we go!
1. FUD (Fear, Uncertainty, and Doubt)
You may have heard the term FUD (Fear, uncertainty, and doubt) before, but maybe not connected to crypto trading. We speak of a FUD in the crypto world when someone is spreading false negative rumors about a cryptocurrency. They create this FUD so that investors become scared, uncertain, and start to doubt the coin. This way, the coin will drop in value.
Why would anyone do something like that? Well, there are situations in which you can benefit from a cryptocurrency declining in price. For example, if you’re shorting crypto. Try not to fall into the FUD trap by always checking if your sources are reliable.
2. FOMO (Fear Of Missing Out)
FOMO is a term that’s not only used in the crypto trading world, but in life situations in general. As humans, it’s natural that you want to avoid feeling like you’ve missed a golden opportunity. Nobody likes that feeling that other people are having an amazing experience without you. And FOMO is a very strong sentiment in the crypto world. Especially in 2017 FOMO was big.
Cryptocurrency prices were breaking records almost every day and there seemed to be no end to the growth of crypto. So many people were bragging about their success stories. It seemed like you had to get on board the crypto-train right now if you didn’t want to be the only one left behind that wouldn’t have profited. This is joining in out of fear. Fear of missing your shot. FOMO.
3. HODL (Hold On For Dear Life)
Some people claim that HODL refers to the word ‘hold’, but with a typo. Others say that it stands for Hold on for Dear Life. Whatever you call it, in the crypto world, when you are ‘hodling’, you have decided that you trust a certain crypto coin so much that you are going to hold on to it and not sell it. If you want to ‘hodl’, you’ll have to be patient. You’ll have to resist the urge to sell your coins when things go bad and play the long-term game. You don’t get distracted by FUDs and wait for the right moment to sell.
Recommended: What does HODL mean?
4. Risk/Reward Ratio
The risk/reward ratio is a metric that is often used in the financial world and also in crypto trading. This ratio tells you how much risk you have of losing your investment as opposed to how high the chances are that you will gain money. For example, if the risk/reward ratio for a certain coin is 1/3, this means that you risk losing €1, but you stand to gain €3. This is a very good risk/reward ratio, but in reality, it can be lower or higher.
5. Crypto fear & greed index
The crypto fear and greed index mentions a score between 0 and 100. The lower the score, the more fear investors have, and the higher the score, the more greed investors have. A lot of crypto traders use this index to help decide when to buy or sell their coins. The crypto fear and greed index determines the outcome based on signals in the market and social channels.
6. ROI (Return on Investment)
Return on Investment (ROI) is a term you often hear in the financial world. And it applies to crypto trading as well. ROI tells you how much profit you will make compared to your initial investment. It also allows you to easily compare different investments to see which ones are more profitable.
ROI = (Ending value of investment – Initial value of investment) / Initial value of an investment
So let’s say you’ve invested €6.000 in Bitcoin, and a year later, your Bitcoin is worth €8.000
ROI = (8000-6000)/6000
ROI = 0.33
This means your return on investment was 33%.
Recommended: What is a good return on investment?
7. DYOR (Do Your Own Research)
You’re probably aware that there is a LOT of information out there about crypto trading. Lots of people have opinions about it and give advice on which coins to buy and which coins to sell. However, you never know if this source might not be truthful and if they’re advice is really a FUD. That’s why it’s important to DYOR. This means coming up with your own strategy for trading crypto.
8. KYC (Know Your Customer)
The Know Your Customer (KYC) policy requires that when you want to invest in cryptocurrency, you first have to create an account when you want to make an exchange. To do this, you’ll have to give out certain information about yourself. Because of the KYC policy, this is mandatory. The reason KYC exists in the crypto world is to prevent criminals from using cryptocurrency to anonymously launder their money.
9. DD (Due Diligence)
The term Due Diligence (DD) is a bit similar to DYOR. DD is an investigation that you are expected to take before entering into an agreement. DD helps you identify any potential problems or unexpected liabilities. People use DD in real estate, before signing a big contract, and also before investing in a certain crypto coin. What it basically comes down to is that you don’t buy a coin on a whim, but do your research before investing.
10. AML (Anti Money Laundering)
Money laundering is a major issue, both for fiat currency and cryptocurrencies. To prevent money laundering in the crypto world, laws, rules, and policies have been set in place called Anti Money Laundering (AML). Thanks to AML practices, fewer criminals can launder their money through cryptocurrency. Even though cryptocurrencies aim for a decentralized market, AML procedures do require a central institution, such as a bank, to look into transactions of investors. This is done to prevent illegal activities.
BUIDL is similar to HODL. Both terms are typos for other words. In the case of BUIDL, it’s obvious that it’s derived from the word ‘build’. BUIDL is a crypto trader term that implies people in the crypto community who choose to keep on building a certain coin, no matter if prices go up or down. The philosophy of BUIDL is that if you really believe in a particular coin, you support it no matter what.
As a crypto trader term ‘SAFU’ is similar to ‘HODL’. It basically means that you should hold on to your coins for now. It’s derived from the word safe. Telling us that the funds are safe to hold onto and that you don’t want to sell them yet.
This blog is for educational purposes only. The information we offer does not constitute investment advice. Please always do your own research before investing.
Any views expressed in this blog and by BOTS do not constitute a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), portfolio of cryptocurrencies, transaction, or investment strategy is suitable for any specific person.