Understanding how cryptocurrencies like Bitcoin work is an important step to trading them responsibly, but investors will also need to familiarize themselves with terms that are exclusive to market trading as well– because Bitcoin is as much of a speculative asset as many other legacy stocks and securities.

While this seems obvious, as most of us turn towards our favorite crypto trading platform in order to move our tokens around, it’s important to keep in mind that understanding hashrate and HODL is just as fundamental as knowing what yield and arbitrage mean. Here are some of the most common trading terms that you’re bound to stumble across.

Ages ago, I was introduced to the easiest way in the world to remember the difference between a bear and bull market– to attack, a bear swipes his paw downward, while a bull scoops its horns up. So, a bear market signifies a downward trend, while a bull market represents upward progression. Simple for sure, but there’s a bit more to it than just a simple upswing or downward swoop.

A bearish outlook or a bear market not only discusses the idea of pessimistic sentiment for whatever market is on the table but can also span great chunks of time. To the point where you could easily describe Bitcoin as an entire asset as a “bullish market,” not only because of the positive outlook for the future but because since its inception, Bitcoin has been steadily making more gains than losses. This is considered the secular trend of the market.

Secular trends refer to the long-term, overall outlook of a given market. Spanning anywhere from 5 to 25 years.

This is more of the median term outlook, with the prevailing trend over the last year or so, taking the title. So, in 2018, Bitcoin had a primary bear market trend. Despite the fact, the secular trend has been bullish.

Secondary trends refer to the short-term performance of a market. These trends tend to refer to specific price trends over a period of a few weeks to a few months.

Corrections occur when a given asset drops 10% or more in price from its most recent peak. While corrections are often seen to sustain a certain price for a sustained period of time, crypto’s volatility usually sees corrections only lasting for a few weeks, as opposed to several months. Corrections in cryptocurrency tend to be a bit fickler than those seen in other markets, and a flurry of factors can contribute to them.

A rally, on the other hand, describes a period of sustained gains within a market. Usually heralded by a 10–20% increase. Rallies can occur in any type of market, meaning during bull or bear trends. Rallies usually happen after a period of price stagnation or a slow decline of value.

Arbitrage is essentially a sneaky but effective trading practice for those who have the time, interest, and understanding necessary. Arbitrage uses the difference of price between markets to its advantage. So, a trader will invest in a lower-priced commodity on one market, then sell that same commodity on a market in which it's listed at a higher price. Buy low, sell high– but all in the same day.

Day trading can be closely associated with Arbitrage, but it doesn’t have to be. The practice refers to both buying and selling assets within the same day. This could be just one asset class or many. As long as an investor's positions are closed by the end of the trading day, day trading has occurred. Day trading is highly speculative and can include buying certain commodities or securities and holding on to them in hopes of turning a profit. So any investor that performs three or more trades per day can be considered a day trader.

Moving average is a super common stock indicator that can help aid traders in the technical analysis of a given stock. Based on past prices, a moving average helps to better define the trend, poor direction, a price is headed– all by looking at where it’s been. Moving averages can span vast amounts of time– like a 200-day moving average– or shorter periods of time, like a 20-day moving average. Comparing longer and shorter moving averages can give traders a better idea of recent price swings or larger market trends, giving traders an idea of when to sell and when to hold on.

Trading volume is the volume of a particular asset that has been traded during a certain time period. This means the number of shares, futures, options, or tokens that have been transacted. This can give investors an idea of how much action there is in a market or how many people are currently interested in engaging with a market. It can give insight into when there is a large sell-off or buy ups or when the market has a decent balance of the two. Giving an indication of market strength and interest.

Yield is pretty self-explanatory; it just refers to how earnings have been gained on any one investment over a period of time. Usually expressed as a percentage of what has been invested and how much the investment is worth. Yields include both price increase and any dividends that have been paid. Used to signify cash flow that an investor can enjoy.

Disclaimer: This is a paid press release from Bitvavo. BitcoinExchangeGuide does not endorse, nor are we responsible for the content included in this paid release. We encourage all of our readers to do their research before interacting with the company.

The post Explaining the Bear and Bull: Market Lingo and Investing Strategy for Cryptocurrency first appeared on BitcoinExchangeGuide.

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