Trading Termenology
Bear Market
A “bear market” is traditionally
defined as a period of negative returns in the broader market to the magnitude
of between 15-20%, or more. During this type of market, most stocks see their
share prices fall, often substantially. There are several strategies investors
employ when they believe that this market is about to occur or is occurring,
and they typically depend on the investor's risk tolerance, investment time
horizon and objectives.
One of the most conservative
strategies, and the most extreme, is to sell all investments before the
downturn begins or before it hits its lowest point, and either hold cash or
invest the proceeds into much more stable financial instruments, such as
short-term government bonds. By doing this, an investor can attempt to reduce
his or her exposure to the stock market and minimize the effects of a bear
market.
"Don't be the bull in a bear market"
Investing in a bear market (bitcoin)
For
investors looking to maintain some positions in the stock market, a defence strategy
is usually taken. This type of strategy involves investing in larger companies
with strong cash flow and a long operational history, which are considered to
be defensive stocks. The reason for this is that these larger, more stable
companies tend to be less affected by an overall downturn in the economy or
stock market, making their share prices less susceptible to a larger fall.
With
strong financial positions, including large cash holdings to meet ongoing
operational expenses, these companies are more likely to survive downturns.
These also include companies that service the needs of businesses and
consumers, such as food businesses (people still eat when the economy is in a
downturn) and companies that sell basic consumer goods (people still need to
buy toothpaste and toilet paper). In this same vein, it is the riskier
companies, such as small growth co.s that are typically avoided because they
are less likely to have the financial security that is required to survive
downturns.
Cryptocurrency market cap (capitalization)
I'm going to explain how it works in both the fiat world and the crypto world so you can leave with the best possible understanding and hopefully it will help separate the clouds and create more vision!!
Market cap or market capitalization refers to the complete value of a company's total amount of shares in a current stock or crypto. it is calculated by multiplying the price of a stock by its total number of outstanding shares. Large cap companies are typically something like a firm or a typically firms that have a high market value of an astonishing 10 billion dollars or more
This example applies to investing with fiat currency however....
Market capitalization in the crypto world is basically the same with some slight differences. I wanted to be sure to explain both of them so you can have the best most thorough understanding when you leave. whether your new or experienced all the information you get is better for everyone...Like they say preparation for the first step or next step saves perspiration.
in the crypto world capitalization is one way to rank the relative size of a cryptocurrency. it is calculated nu multiplying the cost by the supply in circulation
market cap=price X supply in circulation!
the price is actually calculated simply. its calculated by the volume weighted average of all prices reported at all the markets. market prices can be found effortlessly by the market section of each crypto currency page.
Pump and Dump
A pump and dump in cryptocurrency and standard fiat currencies is something to watch for and beware of. How do we spot them and how should we execute a well thought out plan on what to do when we see them.
Pump And Dump Definition- Denoting the fraudulent practice of encouraging investors to buy shares in a particular stock or crypto in order to inflate the price artificially, and then selling one's shares while the price is high. typically leaving a beginner wondering what happened and why they lost their funds!
1. Can we make money off of the? the short answer is yes
2. Can we loose money on the? yes. if your not sure what to watch for then yes the chances of loosing money is very high and for a newer inexperienced investor in which ever currency you prefer whether its crypto or not the same things apply! BE AWARE.
3. Is a pump and dump a scheme? yes it is, it can be started in different ways however the most common are a small group of wealthy people or by a series of social media groups or perhaps by a single yet powerful social media group.
4. So how does a social media group execute a well thought out pump and dump? Again the short answer would be they create a lot of attention or a lot of 'hype' and focus all of the attention on a particular stock or a particular crypto. Once they have a large group of people sold on the particular 'investment' that they are talking about, usually
saying "It's ABOUT TO BREAK LOOK AT IT" or by making comments about how its going to blow up and offer a bunch of bogus reasons they "referd to as the group" will put ALOT of money into the particular investment or crypto they are hyping up thus causing the pump. as it is rising and showing a strong steady rise 'you' find you can no longer resist the temptation and buy in or perhaps do something very bad and the totally opposite of diversification and put all of your money on this 'security' and they in turn decide when its time to pull out and communicate amongst them selves and execute the fast selling of the investment or crypto thus causing the DUMP because they are majority holders, so if you didn't get out fast enough you will loose on this. you need considerable funds to make a great profit on this and it is very common in stocks or cryptocurrencies under 5.00
5. The same rule applies to all social media forms creating the 'hype'
6. Its okay to follow people on investing because some people like myself have the best intentions.
7. They sometimes aren't so easy to spot so do your due diligence and learn how to spot these schemes and how to avoid loss when it comes to making a decision on one.
Breakout and Breakdowns
Breakout and Breakdowns
Hmm what is a break out? no no no no no its not a guy that just broke out of jail or a stunt man who just broke out of that straight jacket!
Breakout is huge its so important, its like when sea biscuit (the horse) comes crashing out of the gate at the race track and fly's by all the other horses with a huge and unimaginable lead up to the finish line, sometimes a little past then something happens after that which isn't as amazing and has to do with a huge down stroke or very bear....market.
The definition of a break out is- when a security or a currency in our case (cryptocurrency i.e bitcoin, ethereum) passes a certain level of resistance which is usually followed by heavy volume and volatility. trader's buy the asset once it breaks above the level of resistance or when it breaks bellow a level of support.
what causes a breakout?- price resistance occurs when a excess level of supply for a particular security or investment accumulates at a particular price and creates a glut in supply that overwhelms demand and impedes the upward movement in the price. when the resistance is breached it would look like a sharp move upward resulting in an abrupt shift and occur when the level of resistance is breached.
Is it a good thing?- Yes! it is great because the stock or coin will be trading at a much higher volume so if you know how to time it or your timing is right then you will be able to sell at the right time sometimes higher than market order and you can take your winnings and invest elsewhere or sell over 75% so you know you made all your money back plus a tidy profit and wait a bit more to sell off the rest and buy back once it is bellow the level of resistance! that last move is a bit risky but that's how I would play it sometimes and it has failed me but the good luckily for me outweighs the bad!
What does a break out look like? sadly I don't have a picture but feel free to google it so you can get an idea of how this looks!
I hope this helps and hope you are enjoying the content and hope it has provided insight and perhaps inspired people and on the flip side hope it makes your crypto investing easier or less intimidating
if you found this interesting leave a comment or leave a comment if it wasn't good enough. if you enjoyed this post check out the one bellow for info on a very important strategy call diversification
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