Now there are more and more people paying attention to trading coins, but very few truly understand it. Beginners don't know where to start, so today we'll discuss with the community.
Newbies share some basic knowledge about the cryptocurrency world.
1. What is trading coins?
In this article, we will first talk about trading coins. In fact, trading coins is similar to trading stocks, real estate, and foreign exchange, as it involves buying low and selling high
to earn profits.
For example, you believe house prices will rise, so you buy a house immediately. When the price rises, you sell it for a profit. The difference is:
Trading coins involves digital currencies, a more flexible trading mechanism (24-hour uninterrupted trading), and a larger profit margin (no price limit).
Making digital currencies an investment target with a return on investment far exceeding traditional stock markets, futures markets, funds, real estate, etc.
2. What is an exchange?
An exchange is a platform for trading digital currencies. Currently, the most commonly used exchanges are Binance, OKX, and Huobi.
There are also many other smaller exchanges, just like there are four major banks and various other banks.
Using highly ranked exchanges is very secure, allowing for safe trading. Some coins can only be purchased on specific exchanges.
3. What is USDT?
An exchange is a place for trading Bitcoin and other digital currencies. Trading digital currencies requires a type of intermediary coin, also known as stablecoin, which is USDT.
This is also the fiat currency we use most frequently.
USDT, also known as Tether, is a virtual currency pegged to the fiat currency US dollar, backed by foreign exchange reserves.
It can be simply understood as equivalent to US dollars.
Tether (USDT) is a token based on the stable value currency US dollar (USD) launched by Tether.
1 USDT = 1 US dollar.
Exchanges themselves cannot directly sell or purchase virtual currencies, nor can they sell you USDT. You cannot buy from the exchange either.
If you want to buy coins, you need to first buy USDT with Renminbi, then exchange USDT for the digital currency you want to purchase. If you want to sell coins,
You need to convert your digital currency to USDT before selling it and converting it back to Renminbi. Once you have USDT, you can exchange it for
any digital currency at the exchange; this is called coin-to-coin trading.
4. Basic terminology for trading coins.
Position: Refers to the ratio of the investor's actual investment to the actual invested funds.
All-in: Buying virtual currency with all available funds.
Reducing positions: Selling part of the virtual currency but not all of it.
Heavy position: Compared to funds, the share of virtual currency is larger.
Light position: Compared to funds, the share of funds is larger.
Empty position: Selling all held virtual currencies, converting them entirely into funds.
Take profit: Selling the held virtual currency after achieving a certain profit to secure gains.
Stop loss: Selling the held virtual currency after losing to a certain extent 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.
Bullish (going long): Buyers who believe that the price of the coin will rise in the future buy coins and wait to sell them at a higher price for profit.
Short (going short): Sellers who believe that the price of the coin will fall in the future sell part of their holdings (or borrow coins from the trading platform).
Locking positions to wait for the price to drop to a certain level to take profits, while also mitigating risks.
Building a position: Buying virtual currency.
Averaging down: Buying virtual currency in batches, for example, first buying 1 BTC, then buying another 1 BTC.
Rebound: When the price of the coin drops too quickly, a price recovery occurs.
Consolidation (sideways): The price fluctuates minimally, and the coin price stabilizes.
Sustained decline: The price of the coin slowly decreases.
Plunge (waterfall): The price of the coin drops rapidly, with a significant decline.
Cutting losses: Selling virtual currency at a loss to prevent further losses after the price has dropped.
Or after shorting by borrowing coins, if the price rises, you lose money buying back virtual currency.
Locked position: Expecting the price of the coin to rise, but the price falls after buying, or expecting the price to fall, but it rises after selling.
Unwinding: After buying virtual currency, the price drops, causing temporary paper losses, but later the price rebounds, turning losses into profits.
Missing out: After selling virtual currency due to a pessimistic outlook, the price rises continuously, and failing to buy back in time results in lost profits.
Overbought: The price of the coin has risen continuously to a certain height, and buying pressure is exhausted, leading to an imminent price drop.
Luring many: After the price of the coin has been stagnant for a long time, the possibility of a drop is high, and most shorts have sold their virtual currencies when suddenly the bears drive the price up.
Luring many parties to believe that the price of the coin will rise, resulting in a buying spree, only to have the bears suppress the price, trapping the bulls.
Luring shorts: After bulls buy virtual currency, intentionally suppressing the price to make shorts believe it will fall, resulting in a sell-off and trapping them.
5. What are mainstream digital currencies?
Mainstream coins are valuable coins; Bitcoin is the leader, and Ethereum is the second. Some people believe only these two are mainstream digital currencies.
Some believe that only the top ten by market capitalization are considered mainstream digital currencies, while others believe that any coin listed on mainstream exchanges qualifies.
Taking non-small numbers as an example, we can see the market capitalization rankings of related currencies. Mainstream coins rank highly, such as Bitcoin, which firmly occupies the top position.
Generally, digital currencies with higher market capitalization rankings are more recognized in the market, have good liquidity, and possess high investment value.
Conversely, digital currencies with lower market capitalization rankings have low recognition and liquidity, and correspondingly higher investment risks, so users are advised to invest cautiously.
6. Risks of trading coins.
One of the most candid pieces of advice in cryptocurrency investment may come from Ethereum founder Vitalik Buterin.
That is, do not invest any money you cannot afford to lose. Again, a reminder to all beginners: act within your means.
It is advised not to borrow money, take loans, mortgage, or use credit cards to participate in such investments, especially in contracts.
7. How to play with contracts.
Coin-to-coin trading belongs to spot trading. To profit in rising or falling markets, contract trading is necessary.
Contract trading is the opposite of coin trading; it belongs to futures trading, meaning that the underlying assets of these trades are standardized contracts.
You can pay a certain percentage of margin to borrow a portion of digital currency and choose to go long if you expect the market to rise.
In the case of expecting the market to fall or going short, you can also trade both ways, opening both long and short positions to hedge risks.
Therefore, through contract trading, you can profit in both rising and falling markets, significantly increasing capital utilization.
The margin ratio corresponds to different leverage levels. For example, if you predict BTC will decline, you need to open a short position of 100 BTC.
You only need to pay a minimum of 1% margin, which is 1 BTC, to borrow 100 BTC, equivalent to 100x leverage.
This means you are leveraging 1 BTC of funds to generate 100 BTC in returns. After borrowing, you sell immediately and wait for a decline. If BTC drops from $35,000 to
$34,000, you immediately buy back 100 BTC and return it to the platform, gaining (35,000 - 34,000) * 100 = $100,000 profit.
If you do not engage in contract trading, you cannot profit from this downturn, and without 100x leverage, you cannot achieve 100x returns.
This is a contract.
Beginners should not engage in contracts! Beginners should not engage in contracts! Beginners should not engage in contracts! Important things must be said three times!
Contracts seem like the fastest way to get rich, but they are definitely not the most reliable route. The 'fast' mentioned here
More often, it's about being closer to liquidation or bankruptcy, rather than closer to financial freedom.
8. Three essential elements for trading coins.
1. An Android phone. (Android is more convenient; iPhones are prone to certificate loss). An Android phone is also essential for playing projects.
2. Spare money. Money that is not urgently needed in the short term and does not affect the quality of life.
3. Mindset. Trading coins carries risks; those who are overly anxious should not participate.
Making money in the cryptocurrency world isn’t solely about trading coins; there are numerous paths to explore, and returns are always proportional to investment.
I hope we can all gain something in the cryptocurrency world.
2. Basic knowledge of the cryptocurrency world illustrated.
The cryptocurrency world refers to the trading market and community of digital currencies, the most famous being Bitcoin. For newcomers to the cryptocurrency world,
it is very important to understand some basic knowledge. This article will introduce the basics of the cryptocurrency world through illustrations.
1. What is Bitcoin?
Bitcoin is a decentralized digital currency supported by the Bitcoin blockchain network. It is designed to not rely on any financial institutions.
It has high security and anonymity.
2. What is blockchain?
Blockchain is the foundational technology of Bitcoin and other cryptocurrencies, a decentralized distributed ledger that records all transaction information.
ensures the security and accuracy of data through encryption and consensus mechanisms.
3. What is an exchange?
An exchange is a trading platform for buying and selling digital currencies, allowing users to trade different digital currencies. You can buy or sell Bitcoin through the exchange
and other digital currencies.
4. What is a wallet?
A wallet is a tool for storing and managing digital currencies. It can be a software wallet, hardware wallet, or online wallet. Users can
use the wallet to send and receive digital currencies, and check balances and transaction records.
5. What is mining?
Mining is the process of verifying and processing Bitcoin transactions by solving complex mathematical problems. Miners maintain
the Bitcoin network by providing computational power and receive a certain amount of Bitcoin as a reward.
6. What is ICO?
ICO (Initial Coin Offering) is a crowdfunding model where companies or projects issue new digital currencies to raise funds.
Investors can purchase these newly issued digital currencies and expect their value to increase in the future.
7. What is a white paper?
A white paper is a detailed project introduction and planning document, usually released by the digital currency project team.
It includes the project's goals, technical architecture, business model, and other information to help investors understand the project's potential and feasibility.
8. What is market capitalization?
Market capitalization refers to the total market value of a digital currency, which is the current price of the currency multiplied by its total issuance.
Market capitalization can reflect the status and influence of a digital currency in the market.
I hope the above simple illustrations can help everyone quickly understand the basic knowledge of the cryptocurrency world before entering.
be sure to do sufficient preparation and risk assessment, and invest cautiously.
The cryptocurrency world is a field full of opportunities and risks. Only by continually learning and accumulating knowledge can one participate better.$BTC $ETH
