Every industry has its own terminology used to describe the scheme of things, that isn’t limited to the crypto industry. Understanding these concepts and terms help shape one’s knowledge of the industry. We will try to explain some basic terminologies used while engaging in crypto trading.
Bitcoin or BTC A decentralized digital currency that uses cryptography to secure transactions and control its creation.
Blockchain: A distributed ledger that records all bitcoin transactions in chronological order and is maintained by a network of nodes.
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Node: A computer that participates in the bitcoin network by validating transactions and blocks.
Block: A batch of transactions that is added to the blockchain after being verified by nodes.
Mining: The process of creating new bitcoins by solving a complex mathematical problem that requires a lot of computing power.
Miner: A node that performs mining and receives a reward in bitcoins for each block it creates.
Halving: An event that occurs every 210,000 blocks (approximately every four years) and reduces the mining reward by half.
Wallet: A software or hardware device that stores the private keys that allow users to access and spend their bitcoins.
Address: A string of alphanumeric characters that represents a destination for sending or receiving bitcoins.
Transaction: A transfer of bitcoins from one address to another that is recorded on the blockchain.
Fee: A small amount of bitcoins that is paid to the miners for including a transaction in a block.
Confirmation: A measure of how many blocks have been added to the blockchain after a transaction, indicating its security and finality.
BIP: A Bitcoin Improvement Proposal, a significant proposal to change Bitcoin at the protocol level.
ASIC: An application-specific integrated circuit, a computer chip customized for Bitcoin mining.
Atomic Swap: A smart contract-enforced exchange of cryptocurrencies across different blockchains.
Batching: The practice of combining multiple bitcoin payments into a single transaction with multiple outputs.
BTO: Buy to Open, buy in order to establish a new long position.
STO: Sell to Open, sell short in order to establish a new short position.
BTC: Buy to Close, buy in order to cover an already-open short position.
STC: Sell to Close, sell in order to exit an already-open long position.
Fork: A split in the blockchain that occurs when different nodes follow different versions of the protocol or rules.
Hard fork: A type of fork that creates a permanent divergence in the blockchain and results in two incompatible networks and currencies.
Soft fork: A type of fork that creates a temporary divergence in the blockchain and can be resolved by upgrading all nodes to the same version of the protocol or rules. – Bitcoin candlestick and chart movement are tools for analyzing the price action of bitcoin in different time frames. A candlestick is a graphical representation of the open, high, low and close prices of a bitcoin trading session.
A chart is a collection of candlesticks that show the historical and current trends of bitcoin price movements. Candlestick and chart movement can help traders identify patterns, trends, support and resistance levels, and potential entry and exit points for their trades.
Some common types of candlesticks and chart movement are:
Bullish and bearish candles: Bullish candles indicate that the price increased during the session, while bearish candles indicate that the price decreased. The color and size of the candles can show the strength and momentum of the price movement.
Doji candles: Doji candles have very small or no bodies, meaning that the open and close prices are very close or equal. They indicate indecision or uncertainty in the market and can signal a reversal or continuation of the trend depending on the context.
Hammer and inverted hammer candles: Hammer candles have long lower shadows and small or no upper shadows, meaning that the price rejected lower levels and closed near the high. Inverted hammer candles have long upper shadows and small or no lower shadows, meaning that the price rejected higher levels and closed near the low. They indicate a potential reversal of a downtrend or an uptrend respectively, especially if they occur near support or resistance levels.
Shooting star and hanging man candles: Shooting star candles have long upper shadows and small or no lower shadows, meaning that the price rose to a high level but then fell back to close near the low. Hanging man candles have long lower shadows and small or no upper shadows, meaning that the price fell to a low level but then rose back to close near the high. They indicate a potential reversal of an uptrend or a downtrend respectively, especially if they occur near support or resistance levels.
Engulfing candles: Engulfing candles are composed of two consecutive candles of opposite colors, where the second candle completely covers the body of the first candle. They indicate a strong change in sentiment and momentum in the market and can signal a reversal or continuation of the trend depending on the context.
Morning star and evening star patterns: Morning star patterns are composed of three consecutive candles: a bearish candle, a small candle of any color, and a bullish candle that closes above the midpoint of the first candle. Evening star patterns are composed of three consecutive candles: a bullish candle, a small candle of any color, and a bearish candle that closes below the midpoint of the first candle. They indicate a reversal of a downtrend or an uptrend respectively, especially if they occur near support or resistance levels.