Nowadays, more and more people are paying attention to the cryptocurrency circle, but there are few people who really understand it. Newbies don’t know where to start. Today, I will share with the newbies in the cryptocurrency circle some basic knowledge about the cryptocurrency circle.
1. What is cryptocurrency trading?
In this article, we will first talk about cryptocurrency speculation. In fact, cryptocurrency speculation is similar to stock speculation, real estate speculation, and foreign exchange speculation. All of them are to make profits by buying at a low price and selling at a high price to earn the difference.
For example, if you think house prices are going to rise, you can buy a house immediately, and when it has risen to a certain level, you can sell it and make a fortune. The difference is that cryptocurrency trading is about digital currency, which has a freer trading mechanism (24-hour non-stop trading) and a larger profit margin (no limit on price fluctuations), making digital currency an investment target with a return on investment far exceeding that of traditional stock markets, futures markets, funds, real estate, etc.
2. What is an exchange?
An exchange is a platform for trading digital currencies. The three most commonly used exchanges now are Huobi, Binance, and OK.
There are many other small exchanges, just like there are four major banks and various other banks. Using the top-ranked exchanges has a high security factor and you can trade with confidence. Some coins can only be purchased at individual special exchanges.
3. What is USDT?
Exchanges are places where digital currencies such as Bitcoin are traded. Trading digital currencies requires an intermediary currency, also called a stable currency, namely USDT. This is also the most commonly used legal currency.
USDT is called Tether. It is a virtual currency that links cryptocurrency to the legal currency, the US dollar. It is a virtual currency that is stored in a foreign exchange reserve account and supported by legal currency. You can simply think of it as US dollars.
Tether (USDT) is a token Tether USD (hereinafter referred to as USDT) based on the stable value currency US dollar (USD) launched by Tether. 1 USDT = 1 USD.
The exchange itself cannot directly sell or buy virtual currency, nor can it sell you USDT, and you and the exchange cannot buy it. If you want to buy currency, you need to first buy USDT with RMB, and then exchange USDT for the digital currency you want to buy. If you want to sell currency, you need to exchange your digital currency into USDT and then sell it for RMB. After you have USDT, you can exchange it for any digital currency on the exchange, which is called currency-to-currency trading.
4. Basic terminology for playing with coins
Position: refers to the ratio of an investor's actual investment to actual investment funds.
Full position: Use all funds to buy virtual currency.
Reduce positions: sell some virtual currencies, but not all.
Heavy holdings: Compared with funds and virtual currencies, virtual currencies account for the larger share.
Light position: Compared with funds and virtual currencies, the share of funds is larger.
Short position: Sell all the virtual currencies in your hand and convert them into funds.
Take profit: After obtaining a certain amount of profit, sell the virtual currency held to keep the profit.
Stop loss: When the loss reaches a certain level, sell the virtual currency held to prevent further losses.
Bull Market: Prices continue to rise and the outlook is optimistic.
Bear market: Prices continue to fall and the outlook is bleak.
Long position (going long): The buyer believes that the price of the currency will rise in the future, buys the currency, and then sells it at a high price to realize profit after the price rises.
Short position (short selling): The seller believes that the price of the currency will fall in the future, so he sells part of the currency he holds (or borrows currency from the trading platform), locks the position and waits for the price to fall to a certain level before taking profit, which can also avoid risks.
Open a position: buy virtual currency.
Covering a position: Buy virtual currency in batches, such as buying 1 BTC first, and then buying another 1 BTC.
Rebound: When the price of a currency falls, it rebounds due to the rapid decline.
Consolidation (sideways): The price fluctuation is small and the currency price is stable.
Negative decline: The price of the currency declines slowly.
Diving (waterfall): The price of the currency drops rapidly and the amplitude is large.
Selling at a loss: After buying virtual currency, the price of the currency falls, and the virtual currency is sold at a loss to avoid further losses. Or after borrowing currency to short, the price of the currency rises, and the virtual currency is bought at a loss.
Being trapped: You expect the price of a currency to rise, but after buying it, the price drops unexpectedly; or you expect the price of a currency to drop, but after selling it, the price rises unexpectedly.
Unwinding: After buying virtual currency, the price of the currency drops, resulting in a temporary book loss, but then the price of the currency rebounds and the loss turns into profit.
Missing out on opportunities: After selling virtual currency due to pessimistic outlook on the market, the price of the currency continued to rise, and you failed to buy it in time, thus failing to make a profit.
Overbought: The coin price continues to rise to a certain height, the buyer's power is basically exhausted, and the coin price is about to fall.
Oversold: The price of the currency continues to fall to a certain low point, the selling power is basically exhausted, and the price of the currency is about to rise.
Lure more buyers: The currency price has been consolidating for a long time and is likely to fall. Most of the short sellers have already sold the virtual currency. Suddenly, the short sellers push up the currency price, inducing the long sellers to think that the currency price will rise and buy in. As a result, the short sellers suppress the currency price, trapping the long sellers.
Luring short sellers: After long sellers buy virtual currencies, they deliberately suppress the price of the currency, causing short sellers to think that the price will fall and sell their currencies, thus falling into the trap of long sellers.
5. What are mainstream digital currencies?
Mainstream currencies are value currencies. Bitcoin is the leader and Ethereum is the second. Some people think that only these two are mainstream digital currencies, some people think that only the top ten digital currencies by market value on the exchange are considered mainstream digital currencies, and some people think that only those listed on mainstream exchanges are considered mainstream digital currencies.
Taking Feixiaohao as an example, we can see the market value ranking of related currencies. Mainstream currencies rank high, for example, Bitcoin firmly occupies the first place in market value.
Generally speaking, currencies with higher market capitalization rankings have high market recognition, good liquidity, and higher investment value; conversely, currencies with lower market capitalization rankings have low recognition, poor liquidity, and correspondingly higher investment risks, and users are advised to buy with caution.
6. Risks of Cryptocurrency Speculation
The most pertinent advice on cryptocurrency investment may come from Ethereum founder Vitalik Buterin: Don’t invest any money you can’t afford to lose. Once again, I would like to remind all newbies to invest within their means. It is recommended not to borrow money, take out loans, mortgage, or use credit cards to participate in such investments, especially when playing with contracts.
7. How to Play the Contract
Coin-to-coin trading belongs to spot trading. If you want to make money in a rising or falling market, you have to do contract trading. Contract trading, as opposed to coin-to-coin trading, belongs to futures trading, which means that the underlying assets of these transactions are standardized contracts.
You can pay a certain percentage of margin, borrow a portion of digital currency, and choose to go long if the market outlook is bullish, or go short if the market outlook is bearish. You can also trade in both directions, long and short, and hedge risks. Therefore, you can make money through contract trading regardless of whether the market is rising or falling, which greatly improves the utilization rate of funds.
The proportion of margin payment corresponds to different leverages. For example, if you judge that BTC is bearish in the future market and want to open a short order of 100 BTC, you only need to pay a minimum of 1% of the margin, which is 1 BTC, to borrow 100 BTC, which is 100 times leverage, which is equivalent to using 1 BTC to leverage the income of 100 BTC. After borrowing, you sell it immediately and wait for the price to fall. If BTC falls from 35,000 US dollars to 34,000 US dollars, immediately buy back 100 BTC and return it to the platform, you will get (35,000-34,000) * 100 = 100,000 US dollars in income. If you do not use contract trading, you cannot profit from this wave of decline. If you do not add 100 times leverage, you cannot get 100 times the income. This is the contract.
Newbies should not play with contracts! Newbies should not play with contracts! Newbies should not play with contracts! Important things should be said three times! Contracts may seem like the fastest way to get rich, but they are definitely not the shortest way. The "fast" mentioned here is more often the fastest way to blow up the account and go bankrupt, rather than the fastest way to financial freedom.
8. Three Essential Elements for Cryptocurrency Trading
1. An Android phone. (Android is more convenient, Apple's certificate is easy to lose) Android phones are also necessary for playing projects.
2. Spare money: Money that is not urgently needed in the near future and will not affect the quality of life if lost.
3. Mindset: Cryptocurrency trading is risky, so people who are worried about gains and losses should not participate.
The cryptocurrency world is not the only place where you can make money, there are so many paths to explore, and the return is always proportional to the investment. I hope you and I can gain something in the cryptocurrency world.
This article does not constitute any investment advice, but merely an explanation of the current situation and terms.
