Some Important Bitcoin Trading Terms That Everyone Should Know

by | Dec 5, 2022 | News | 0 comments

Finance is not just a numerical value – it’s a tangled skein of supply chains that depend on each other.

Websites like Bitsoft360 cater their UI and strategies for experienced and new bitcoin traders.

The platform has paid extraordinary attention to detail while designing its user interface.

One Bitcoin exchange glitch can affect the entire market value, and trading bitcoin is no exception.

So it’s essential to understand the various kinds of bitcoin exchanges.

The first thing is whether they’re decentralized or centralized.

Centralized exchanges allow you to exchange fiat currency for various cryptocurrency tokens and vice versa, while decentralized ones do not have a single control point.

In other words, no single entity controls the funds on a decentralized exchange; all transactions are conducted directly between users.

It’s common for centralized exchanges to issue their own digital tokens in order to facilitate transactions.

Here are some critical bitcoin trading terms that everyone should know.

i. What are Options Contracts?

Options Contracts are derivative instruments used by investors to trade the price of one asset for another, with the object of making a profit from price movement.

Options contracts can be traded by people on most crypto-to-crypto and crypto-to-fiat exchanges.

But most centralized exchanges do not allow them due to regulatory concerns.

The critical thing to know about options is that they are a derivative contract whose value derives from the underlying asset’s movements.

ii. Arbitrage Trading

Arbitrage trading is a good option for beginner traders, especially those with no access to fiat-to-crypto exchanges.

It’s essentially the same strategy as trading on margin, except that it can be used by users more widely and with more cryptocurrencies involved.

Arbitrage trading involves buying tokens on one exchange at a low price and selling them on another exchange at a high price in order to make a profit.

To trade on an arbitrage basis, you must have accounts on multiple exchanges.

Arbitraging works pretty well when there are price discrepancies between different exchanges.

One of the main reasons for this is that many institutional investors and large-scale Bitcoin miners use centralized exchanges.

Centralized exchanges are, obviously, centralized and, therefore, prone to hacking attacks.

It gives decentralized exchanges a distinct advantage in terms of security, but this is not the sole benefit of adopting a decentralized exchange.

Decentralized exchanges allow for fiat-to-crypto trading pairs that can be used to buy an altcoin with your fiat currency.

It is a valuable feature for novice traders who don’t have access to regular cryptocurrency exchanges.

Coin pairs also tend to have more options on decentralized exchanges because there aren’t as many restrictions on which tokens can be listed.

iii. Elliott Wave Theory

Elliott Wave Theory is a pseudoscientific theory based on the idea that collective human psychology moves in waves.

These movements form patterns that can be seen and measured and can be used to predict the future price of bitcoin.

The most popular forms of this theory are swing trading, trend trading, and counter-trend trading.

One common scenario involves deciding whether to buy a coin at a lower-than-average or higher-than-average price based on your knowledge of the following waves and other market indicators.

Swing traders have the most freedom to alter their strategies regarding time frames and entry points due to their more flexible approach to trading.

iv. Index Investing

Index investing is another popular option among exchange users who seek to trade regularly and make a predictable amount of money rather than spending hours or days researching new signals and placing trades.

The critical difference between index investing and swing trading is that the former focuses on buying an entire index at a single price point.

In contrast, the latter focuses on specific stocks traded within an index.

In 2017, bitcoin was one of the first cryptocurrency assets to be included in major indexes such as:

  • FTSE All-World
  • STOXX Europe 600,
  • STOXX Asia 600, and
  • STOXX Canada 60

v. Slippage

Slippage occurs when the price is not at the market rate.

It can occur on any exchange, but it’s most common on those that allow stop-loss orders, an order type that tells the exchange to sell a security if its price reaches a specified trigger point.

Slippage is incredibly difficult to avoid because it results from real-life issues, such as spontaneous market movements and human error.

While slippage is unavoidable, the ability to set stop-loss orders and use other trading strategies can help traders mitigate this issue.

When comparing exchanges, one thing to remember: A high price on one exchange can lead to a low price on another.

This is because most trading strategies are based on the idea that arbitrages occur between exchanges to create price discrepancies.

It’s essential for traders to understand the importance of the spread between bids and asks – the difference between an asking price and a bid price – before they take any action.


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