Introduction :
This first Chapter aims to advanced 17 concepts that you must know to
master the art of not getting Bankrupt once you start trading.
Before you begin to learn trading, you must have a few Questions in mind
1. Can trading be a profitable means of income?
2. How much should I risk?
3. How much leverage should I use?
4. How much profit can be expected?
5. How to set the target.
Your first step would be to forget everything you know about trading and be
ready to take a restart. There are many ways to trade the markers but we are
going to restrict ourselves to trading via Charts. Many people question if the
market can just be studied through charts and I would quote John Murphy.
Technical Trading Dictionary:
First we take a look at common trading jargon. It is not important for you to
memorise all of them as it will all become familiar over time as you study
more tutorials and interact with many other traders. However, it is necessary
to go over them once to make sure you are not lost when you come across a
new term.
Arbitrage - a method of making profit using the price difference between
exchanges
Accumulation - The process by which one builds a position in an asset
Altcoin - all coins except Bitcoin
Ask/Bid - Sell orders are asks and buy orders are bids. (refer Figure below)
ATH - All-time high
Bearish MS - when price makes a series of lower lows and lower highs
Bearish MSB OR BOS - when the price takes out a low to form a lower low, we
get a brearish break of structure
Bots - automated trading set-ups on exchanges
BULL - is someone expecting the price to go higher, and the bear is the
opposite.
Bullish MS - when the price makes a series of higher highs and
higher lows
Bullish MS - when the price makes a series of higher highs and higher lows
Bullish MSB OR BOS - Bullish market structure break of break of structure,
happens when the price takes out a high to form a higher high
Bull Market - A market where the prices are seeing a continuous uptrend,
leading to new highs being created.
Bull Trap - A technique used by market makers to buy a huge amount
suddenly, spiking the price.
Bubble - a situation where the prices are irrationally high as compared to the
actual value of the asset.
Bag - A position held in any asset or coin
Bag Holder - Someone holding a coin at a loss
Bear Trap - The market makers sell enormous amounts, pushing the prices
down, in turn liquidating everyone else that had bought, producing a
cascading effect of liquidations get a bearish break of structure.
Bull Market - A market where the prices are seeing a continuous uptrend,
leading to new highs being created.
Bull Trap - A technique used by market makers to buy a huge amount
suddenly, spiking the price.
CHOCH - Change of Character, is the first switch turning the substructure
from bullish to bearish or bearish to bullish
CMP - Current Market Price
Consolidation - A period where the price is ranging in a well-defined region.
Correction - A fall in price after making a new peak or an upward rally.
Day Trading - Taking a position in the market and exiting it the same day
Deep Swings - A deep swing high is the highest point that causes the swing
low, and a deep swing low is the lowest point that causes a swing high.
Depth of Market (DOM) - it is a list/window that shows how many open limit buy and limit sell orders there are at different prices in real time.
Deviation - When price goes below the support but reverses, or the same
happens with resistance.
Downtrend - A price trend characterised by lower highs and lower lows.
Exchange - In terms of Crypto, a marketplace that allows buying and selling
of Bitcoin and other coins.
FIB Levels - Fibonacci levels are specific levels from swing point to swing
point, these levels represent percentages. Price reacts at these levels.
FOMO - Fear of Missing Out, a behaviour where traders enter a trade without
enough research due to the fear of missing out on profits.
FUD - Fear, Uncertainty, and Doubt, negative sentiments or misinformation
affecting market sentiment.
Fractal - A pattern of price movement that has occurred earlier and might
occur again.
FTA - First Trouble Area, an area where price might be rejected before
reaching the target.
HH - Higher High
HL - Higher Low
LH - Lower High
LL - Lower Low
HTF - Higher Time Frame
LIQ - Liquidity; a liquid asset or coin means how quickly you can buy or sell
something without moving the price too much.
Laddering - you place multiple buy or sell orders when wanting to enter a
trade setup and get an average entry price
Leverage - refers to the extra amount of asset bought or sold, over your
capital
Long Position - this is a buy position with leverage
LTF - Lower Time Frame, usually anything under 4H
Margin - The amount of funds required to open a leveraged trade.
Market cap - the market capitalization of an asset calculated by current
supply of coins multiplied by CMP of one coin
Market Maker - an individual or firm that can cause large swings in price due
to overwhelming position size.
MM - Market Maker; is an individual or firm that is able to single-handedly
cause large swings in price.
MS- Market Structure, it defines the structure that the current market is
trading in.
Pattern - A chart pattern is a predefined shape that has been historically
studied by technicians. Traders try to use these previous performance
statistics to predict future price movements.
Point of Control (POC) - the price level for the time period with the highest
traded volume.
Positional Trading - the aim is to buy monthly lows and hold them for days,
weeks or sometimes months. This is a longer term trading time period
Rally - an upward trend leading to increase in price of the asset, can happen
in both bear and bull market
Return-on-Equity (ROE) -this is calculated by the actual capital employed in
a trade and not through leverage
R:R - Risk to Reward Ratio 2:1 R:R can simply be called as 2R
Sell off - Profit taking after a rally in price, which leads to lowering of price of
the asset
Short position - Exact opposite of a long entry. You enter a short when you
expect the prices to fall.
Sideways market - an indecisive market which isn't leading to a breakdown
or a break out
Spread - the difference between what the sellers are ready to sell at and
what the buyers are ready to buy at. There always exists a small spread on all
exchanges. The higher the liquidity, the lower the spread
Support and Resistance - a support is a zone or line (green below) where we
can expect price to bounce back. Resistance (red below) is a line/zone where
we can expect the price to rebound downwards.
Stop Loss - Order that is triggered when the price goes below this point, and
is used to cut losses
Swing Trade - This method looks for buying and selling positions in a weekly
range. Swing traders make 2-3 traders a week.
Time Period / Time Frame - the time spread of each candle in a chart.
Common time periods are 15 min, 30 min, 1 hour, 4 hour, daily and so on. In a
In a 15 min time frame, a candle will take 15 mins to close.
Total Supply - the amount limit of coins that will ever exist.
Trading Charts - Where to see them? There are several websites, I use
Tradingview Simple, easy and offers everything most people need. You
don't need a paid version. The basic free version is enough
Uptrend - a price is said to be in an uptrend when it is making higher highs
and higher lows
Value Area - the range of price levels in which a specified percentage of all
volume was traded during the time period. Typically, this percentage is set to
70 percent, but I use 68 percent
Value Area Low (VAL) - The lowest price level within the value area
Value Area High (VAH) - The highest price level within the value area
Volatility - it is the percentage movement in price of an asset over a period.
Volume Weighted Average Price (VWAP) - incorporates price and volume. It
is a S/R line. When price is above VWAP, it is above value and when it is below
price, it is below value
Walls - Extremely Larger orders at a range
As we conclude Part 1 of our comprehensive trading course, it's essential to recognize that a solid grasp of basic trading concepts and terminology is the cornerstone of your journey toward becoming a successful and profitable trader. Understanding these fundamentals not only demystifies the complexities of the financial markets but also equips you with the confidence to make informed decisions. By mastering the basics, you're laying a strong foundation that will support more advanced strategies and techniques discussed in the subsequent parts of this course. Embrace this foundational knowledge as your toolkit for navigating the trading world effectively. Stay tuned for Part 2, where we'll delve deeper into advanced strategies, building upon the concepts introduced here to enhance your trading proficiency.