Glossary Term: Cryptocurrency

In the context of trading and investment, a “position” refers to the amount of a security, commodity, or currency that is owned (a long position) or borrowed (a short position) by an individual or dealer. A position can be profitable or unprofitable, depending on market movements.

Here are the two basic types of positions:

1. Long Position: When a trader buys a security with the expectation that the asset will rise in value, it is called taking a long position. If the value of the security does increase, the trader stands to make a profit. Conversely, if the value decreases, the trader will incur a loss.
2. Short Position: Conversely, when a trader borrows a security and sells it on the open market with the expectation of buying it back later at a lower price, it is called taking a short position. If the price of the security does indeed drop, the trader can buy it back at the lower price and make a profit on the difference. However, if the price of the security increases, the trader will incur a loss.

In addition to these, there are also derivative positions which involve options, futures, and other financial derivatives. These can be more complex and involve a wide variety of possible strategies.

It’s important to remember that all trading and investment strategies carry risk, and the potential for profit is always balanced against the potential for loss. It’s crucial to fully understand any position you’re considering before you enter it.

In trading, going “long” refers to buying a financial instrument like a stock, bond, or commodity with the expectation that the price will rise in the future. It’s the most traditional and well-known trading method – you buy low and aim to sell high. When you take a long position, you’re essentially betting on the positive performance of an asset.

For example, if you think that the shares of a certain company will rise, you can take a long position by buying the shares now. Then, if the share price does indeed rise, you can sell the shares at the higher price and profit from the difference.

The term “long” also applies to derivative products such as options and futures. For instance, buying a call option is also considered a long position because it gives you the right (but not the obligation) to buy an asset at a specific price within a specific period of time, anticipating a rise in the market price of the asset.

Remember, while going long offers potentially unlimited profits (since there is no upper limit to how much an asset’s price can rise), it also involves the risk of losses if the price of the asset falls instead of rises. The worst case scenario would be losing the entire investment if the asset’s price drops to zero.

In the context of internet culture, “trolling” refers to the act of provoking or annoying others online with the aim of creating disruption or eliciting strong reactions. This is usually done through inflammatory, off-topic, or controversial comments or posts, often under the guise of seemingly normal dialogue or innocent questions.

The person who engages in this behavior is typically called a “troll”. Their motives can vary: some may find amusement in causing distress, while others might be looking to distract or derail meaningful conversation. It’s important to note that trolling is generally viewed negatively, as it can contribute to a hostile online environment and can sometimes escalate into cyberbullying or harassment.

A shill is a person who publicly promotes or praises something or someone for reasons of self-interest, personal profit, or in the case of companies, for the benefit of the product or organization they represent. The term originated from carnival and circus slang, where a shill would be a plant in the audience, pretending to be an enthusiastic independent customer to entice real customers.

Shilling is also a term used in online communities to describe the act of endorsing a product, service, or viewpoint under the guise of sincerity, but where the individual has a vested interest. It is often viewed negatively, especially when it is done deceptively.

As a term, it can also apply to financial markets. For example, in cryptocurrency communities, a shill might excessively hype a particular coin or token with the aim of increasing its price or attracting buyers, often while concealing their own ownership or interest in the asset. This usage has grown with the rise of social media, where such behavior can be widely disseminated.

FUD is an acronym for Fear, Uncertainty, and Doubt. It’s a strategy often used in sales, marketing, public relations, politics, and propaganda. The term was originally coined by Gene Amdahl after he left IBM to found his own company, referring to the fear, uncertainty, and doubt that IBM would instill in its customers in order to keep them from switching to a competitor’s products.

FUD is also frequently used in the field of cryptocurrencies and investing. In this context, FUD can refer to any negative information, true or not, that’s disseminated with the purpose of driving down prices or causing people to sell their holdings. It can sometimes be used as a manipulative tactic to decrease the price of an asset for personal or competitive gain.

As such, “spreading FUD” is often frowned upon because it’s seen as promoting an irrational response rather than reasoned decision-making.

Overtrading is a common pitfall in stock market trading, typically referring to the excessive buying and selling of securities by a trader. It is characterized by an unusually high frequency of transactions.

Overtrading can occur due to several reasons:

1. Impatience: Some traders, especially beginners, may want to see immediate results and start trading excessively.
2. Overconfidence: Traders who’ve seen some early success may become overconfident, leading them to trade more frequently than they should.
3. Chasing losses: If a trader has lost money, they may start making more trades in an attempt to recover those losses, often taking on high-risk positions.
4. FOMO (Fear Of Missing Out): Traders might make more trades than necessary due to the fear of missing out on potential gains.

Overtrading is generally considered detrimental because:

1. Increased transaction costs: Each trade carries transaction costs, such as broker commission and spread costs. The more you trade, the more you need to make just to cover these costs.
2. Greater risk: Overtrading can lead to less thought-out decisions, resulting in the taking of more risks. The increased number of trades also inherently increases the potential for losses.
3. Psychological pressure: Overtrading can lead to stress, clouded judgement, and potentially harmful emotional reactions to short-term market movements.

Strategies to avoid overtrading might include setting strict trading rules, only trading based on clearly defined strategies, and maintaining a disciplined approach to trading (for example, setting stop losses and take profit levels).

A limit order is a type of order to buy or sell a security at a specific price or better.

When you place a limit order to buy a security, the order will be executed at the limit price or lower. Conversely, when you place a limit order to sell a security, the order will be executed at the limit price or higher.

For example, if you want to buy a stock, but don’t want to pay more than $50 per share, you could place a limit order to buy the stock at $50. If the stock’s price falls to $50 or below, your order would be executed.

Similarly, if you own a stock and want to sell it, but don’t want to sell for less than $100 per share, you could place a limit order to sell at $100. If the stock’s price rises to $100 or above, your order would be executed.

Limit orders allow traders to have precise control over when their orders are filled and at what price. However, there is no guarantee that a limit order will be executed, as it requires the market price to reach the limit price. If the market price never reaches the limit price, the order will not be filled.

It’s also worth noting that limit orders may be partially filled in situations where the market has limited liquidity at the desired price. For instance, if you place a limit order to buy 100 shares at $50, and only 50 shares are available at that price, your order would be partially filled. You would purchase the 50 shares available, but the rest of your order would remain open until more shares become available at your limit price or you decide to cancel the order.

In the context of trading, slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. Slippage often occurs during periods of higher volatility when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.

There are two types of slippage: positive and negative. Negative slippage is when a trade is executed at a worse price than initially expected. This typically occurs when buying a security at a higher price or selling at a lower price. Positive slippage, on the other hand, happens when a trade is executed at a better price than what was initially expected. This usually occurs when buying a security at a lower price or selling at a higher price.

While traders usually aim to avoid negative slippage, some market conditions make it inevitable. Factors that can influence slippage include liquidity, market volatility, and the type and size of the order. To limit the risk of slippage, traders often use limit orders instead of market orders, as limit orders only execute at the set price or better.

A market order in trading is a type of order that an investor makes through a broker or brokerage service to buy or sell a security at the best available price in the current market. It is a request to buy or sell a security immediately at the prevailing market price.

Market orders are the most straightforward type of order. They don’t guarantee a specific price, but they do guarantee the order’s execution. If you place a market order during the market hours, it will typically be executed instantly at the current market price.

There are some risks associated with this type of order, namely that the final executed price may be different from the seen price when the order was placed. This happens due to price fluctuations, particularly in volatile markets where prices can change rapidly. This is known as slippage. The final executed price could be higher (for buy orders) or lower (for sell orders) than expected.

Nevertheless, market orders are widely used for their simplicity and high likelihood of execution, which makes them suitable for traders and investors who prioritize executing their trades over getting a certain price.

In trading, a “fill” refers to the execution of an order. When you place a trade to buy or sell a security, the trade is considered “filled” when it has been fully executed. That means all shares or contracts you wanted to buy or sell have been transacted at the desired or accepted prices.

There are different ways an order can be filled:

1. Immediate or Cancel (IOC): The order is filled as soon as possible at the specified price or better. Any portion of the order that cannot be filled immediately is cancelled.
2. Fill or Kill (FOK): The entire order must be executed immediately at the specified price or better. If this is not possible, the entire order is cancelled.
3. Good ‘Til Cancelled (GTC): The order remains open until it is either filled or cancelled.
4. Day Order: The order is cancelled if it is not filled by the end of the trading day.
5. Market Order: The order is filled at the best available price in the market at the moment.
6. Limit Order: The order is filled at a specific price or better. If the market never reaches this price, the order may not be filled.

The terminology can vary slightly depending on the market (stocks, options, futures, forex, etc.), but the basic concept remains the same: a “fill” is the completion of a trade.