Investing and Trading Glossary of Terms
A:
Appreciation – The increase in value of an asset.
Asset – Anything that holds value and is owned by a business or person.
Annualized – A process where figures covering less than one year are extended to cover a 12 month period.
APR (Annual Percentage Rate/Return) – The annual rate that is returned by an asset or the cost of holding a debt
B:
Bear Market (AKA being ‘Bearish’) – A long period of time where assets continually drop in price. For the Stock market this usually means 20% or more. For riskier assets like Cryptocurrencies this can be 70% or more. This is the opposite of a Bull Market.
Bit – Also known as a micro bitcoin, is equal to 1 millionth of a Bitcoin. 1 Bit = 100 Satoshis.
Blue Chip – Refers to assets that are relatively low risk and have high value (market cap) and have performed well historically.
For the stock Market this would be be top companies or indexes such as the S&P500, Microsoft, Nvidia, or Apple.
For Cryptocurrencies this means Bitcoin and sometimes can include other top Altcoins (such as Ethereum).
Break Even – Closing a trade at the same point you entered the trade, or closing a trade with $0 profit or loss, or selling an asset at the same price you bought.
Bull Market (AKA being ‘Bullish’) – A market where prices are in an upward trend. This is the opposite of a bear market.
L:
Leverage (AKA Margin) – This means using a multiplier to trade and increase your position size. For example if you use 10X leverage a $100 becomes a $1,000 position. However, this multiplies your gains and losses. If the asset goes up 10% this results in a 100% gain due to the leverage, a 10% drop in asset price results in a 100% loss and could result in a forced liquidation depending on the type of leverage you are using.
There are 2 main types of leverage: Isolated Margin and Cross Margin. Isolated margin means each trade is isolated from each other and a 100% loss results in that position being liquidated (force closed). Cross Margin means all trades are linked with your total account value, this means you can withstand larger swings but you are at risk of an entire account liquidation if price goes against your trades bad enough.
S:
Short – This is taking a trade or bet that the market is going to go down in price. There are many ways to take shorts against different assets. The most basic is to sell an asset (stock, crypto, commodity) and then buy the asset back at a lower price. Another method is to open a short trade on a margin account, this will require you to enable margin trading with your brokerage. The 3rd method is to use a crypto exchange that has leverage trading, this allows you to open a short against assets with varying levels of leverage.