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12 Terms Every Crypto Trader Should Know. Part 2

Read Part #1 of this subject on https://www.finextra.com/blogposting/22257/12-terms-every-crypto-trader-should-know-part-1

7. Historical Maximum (ATH)

This term probably requires no explanation. Historical High (ATH - All-Time High) is the highest recorded price of an asset. For example, Bitcoin's ATH on Binance during the 2017 bull market was $19,798.86. This was the highest price at which Bitcoin traded in the BTC/USDT pair.


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One of the compelling aspects of the asset reaching ATH is the idea that almost everyone who has ever bought an asset makes a profit. However, if an asset moves beyond its ATH, there will be no sellers left waiting to exit at breakeven. This is why some refer to reaching the ATH as a "blue sky breakout," since there are not necessarily obvious resistance areas ahead.

Reaching ATH is also often accompanied by a surge in trading volume. Why? Day traders are interested in making quick profits through market orders and selling the asset at a higher price. Does breaking through the ATH mean that the price will continue to rise forever? Of course not. Traders and investors will at some point seek to lock in profits and set limit orders at certain price levels.

This is especially true for periods when previous historical highs are exceeded over and over again. Parabolic moves can often end in a very sharp price drop, as many investors exit as soon as they realize that the uptrend is coming to an end. Note the Bitcoin price drop from $20,000 after the parabolic move in December 2017.

8. Historical Low (ATL)

Historical Low (ATL - All-Time Low), the opposite of ATH, is the lowest price of an asset. For example, the historical low of BNB is 0.5 USDT in the market pair BNB/USDT on the first trading day.

Breaking through the ATL of an asset can have the same effect as breaking through the ATH, but in the opposite direction. When the previous ATL is broken, many stop orders may trigger, causing a sharp move downwards.

Since there is no price history below the previous ATL, the market value can simply continue to decline. Since there is no logical reason to stop, buying at such a time is very risky.

To consider opening a long position, many traders will wait for a confirmed trend change in the moving average or other indicators. Otherwise, when the price dips lower and lower, they are ready to get frustrated and give up, eventually selling assets at an undervalue.

9. Do Your Own Research (DYOR)

When applied to financial markets, DYOR (Do Your Own Research) is a term closely related to fundamental analysis (FA). It means that investors should do their own research and not rely on someone else's analysis. A similar phrase is often used in the cryptocurrency markets: "don't trust, but verify.

The most successful investors do their own research and draw their own conclusions. Thus, someone who wants to succeed in the financial markets must develop his or her own unique trading strategy. This approach can lead to disagreements between investors, which is a natural part of investing and trading. One investor may take a bullish position on an asset and another may take a bearish position.

Different opinions may correspond to different strategies, and successful traders and investors may have completely different strategies. The idea is that they have all done their own research, come to certain conclusions, and make investment decisions based on them.

10. Due Diligence (DD)

Due Diligence (DD - Due Diligence) is related to DYOR. The term means that before entering into an agreement with another party, a rational trader or company must gather and analyze information. When rational partners come to an agreement, they are expected to conduct due diligence on each other. Why? Any rational entity wants to make sure there are no potential red flags in the deal.

Otherwise, how can one compare potential risks with expected benefits? The same is true for investments. When investors are looking for potential investment targets, they need to do their own comprehensive analysis of the project to make sure that all risks are considered. Otherwise, they have no control over their investment decisions and may end up making the wrong choice.

11. Anti Money Laundering (AML)

Anti Money Laundering (AML) refers to a series of regulations, laws and procedures designed to prevent criminals from legalizing illegally obtained money under the guise of legitimate income. AML procedures make it much more difficult for criminals to "launder" funds by hiding or disguising the source of the assets as legitimate. Criminals will always look for ways to hide the true source of funds. Because of the complexity of the financial markets, there are many options for this.

Derivatives from derivatives and other complex types of market fraud can make tracking the true source of funds quite difficult (but not impossible). AML rules require financial institutions such as banks to monitor customer transactions and report suspicious activity. In this way, criminals are less likely to get away with laundering illegally obtained funds.

12. Know Your Customer (KYC)

Stock exchanges and trading floors must comply with national and international standards. For example, the New York Stock Exchange (NYSE) and NASDAQ must comply with rules established by the U.S. government. The KYC (Know Your Customer or Know Your Client) principle stipulates that organizations offering opportunities to trade in financial instruments must verify the identity of their customers. Why is it important? The main reason is to minimize the risk of money laundering.

Moreover, the KYC rules are not only valid for participants in the financial industry. Many other areas also have to follow these rules. The KYC principles are usually part of a broader anti-money laundering (AML) policy. Closing thoughts Cryptocurrency trading terms can seem confusing at first. But now you know most of them, so you can feel more SAFU with these abbreviations. Make sure to DYOR on FUD, don't succumb to FOMO over a coin that has reached ATH, and keep HODLing and BUIDLing!

 

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