When dealing with stock market, cryptocurrency, or Forex trading, several terms may sound strange. Although the terms like ATH, ROI, FOMO, or HODL may seem unfamiliar, they can be very useful if you intend to move forward with the financial markets. This article explores the most significant trading terms that a trader should comprehend while trading crypto assets.
1. Fear of Missing Out (FOMO)
FOMO denotes an emotion that the investors feel while they rush to purchase an asset as they are afraid of missing out on a notable profit opportunity. With the involvement of heavy emoticons, FOMO by a substantial number of investors can pave the way for parabolic movements in the asset price. Hence, some investors act as if they are in a musical chair game and often indicate a bull market’s later phases.
2. Fear, Uncertainty, and Doubt (FUD)
The term Fear, Uncertainty, and Doubt (FUD) is often utilized in financial markets when there are sideways movements. In such a situation, majority of the investors show reluctance and less confidence while refraining from investment. Behind this scenario, FUD operates as a strategy that focuses on discrediting a specific brand, product, or an asset by spreading significant misinformation. In several cases, it turns out that the information is misleading or false. Nonetheless, there are also some cases where the information is true. Thus, it can be supportive to ponder what benefits people can get by openly sharing such opinions.
3. Bull and Bear Market
These two terms are opposite to each other in their nature. A bull market takes place at a time when an asset shows rapid and massive price rise. This occurs when bulls or the optimistic investors overpower the bears, who anticipate decline in the price of the asset. On the other hand, a bear market is the contrary, indicating a sudden and noteworthy slump in an asset’s price. In this case, bears overpower bulls by short selling as well as other such strategies to make profit from the asset’s plunging prices.
4. All-Time High (ATH)
An all-time high (ATH) is the peak price level of an asset. Keeping this in view, when an asset goes through a prolonged bear market, several traders experience notable losses. As a result of this, many of them intend to quit the market before more harm. Nonetheless, once the asset surges past its all-time high price, the investors are provided with huge returns, and they do not want to leave the market.
5. All-Time-Low (ATL)
Contrary to all-time-high (ATH), all-time-low (ATL) represents the lowest price in an asset’s history. Thus, dipping below an all-time-low price may trigger sharp further decline. Therefore, purchasing an asset at such a point could be very risky. In line with this, the investors need to be cautious when the asset breaches the all-time-low level.
6. SAFU
The term “SAFU” is derived from a meme incorporating Changpeng Zhao (CZ), the former CEO of Binance, asserting the safety of funds amid unplanned platform maintenance. While responding to this meme, Binance has developed the Secure Asset Fund for Users (SAFU) for the provision of a fund to cover likely security breaches. The respective funds are kept in an isolated cold wallet. The concept is that the fund may recompense the loss of the consumer funds in some extreme cases.
7. HODL
HODL underscores the misspelling of the word “hold.” This term basically deals with crypto holding and buying strategy. In addition to this, HODLing is another variant of this term, referring to keeping hold of investments irrespective of price plunges. Apart from that, HODLers are the investors who prefer to hold investments and are not efficient in short-term trading. They have high conviction in a specific asset and focus on keeping their investments for longer-term periods.
8. Anti Money Laundering (AML)
Anti Money Laundering (AML) stands for several regulations, procedures, and laws that are designed to keep criminals from camouflaging illegally acquired funds as legitimate revenue. AML processes make it difficult for criminals attempting to launder funds into clear money. AML regulations need financial entities like banks to observe the transfers of the users and report malicious activities. In this way, they detect the money laundering operations.
9. Due Diligence (DD)
Due diligence (DD) refers to the investigation carried out by a business or rational person before reaching a contract with the counterparty. In this respect, a rational business or person is supposed to do due diligence to guarantee that no likely red flags exist in the deal. While avoiding this, they cannot compare the likely risks with the anticipated benefits. This is exactly the case with investments. When investors think of making investments, they should do their own due diligence in order to have an overview of the risks involved in that investment. Otherwise, skipping this could leave them with no control over investment decisions. Hence, they may ultimately make wrong choices.
10. Know Your Customer (KYC)
Trading platforms and stock exchanges comply with regional and international regulations to operate. For instance, the NASDAQ and NYSE have to follow the guidelines implemented by the United States government. Keeping this in view, Know Your Customer (KYC) guidelines guarantee that institutions offering the trading of diverse financial instruments validate the identity of their consumers. This minimizes the risks related to money laundering.
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