Despite their differences, cryptocurrency, forex, commodity, and stock markets have something in common: they’re all financial markets. In this episode of the “Do You Speak Crypto?” series, let’s take a look at some of the most common terms you may come across in all financial markets:
By bringing together cryptocurrency and traditional markets, DIFX allows you to trade a wide variety of trading pairs across various markets. Learn more about it now.
In trading platforms, like exchanges, an order is a request or instruction to buy or sell a financial instrument, like cryptocurrency or stocks. Market order and limit order are quite common among traders:
In a spot market, you receive your assets immediately after your order is executed. For example, you have some Tether and decide to exchange them with some Bitcoin. All you have to do is go to the DIFX Spot exchange, select BTC/USDT trading pair, and place an order. Once the order is executed, you’ll receive your Bitcoins in your DIFX wallet immediately.
In futures markets, you agree to buy or sell a specific instrument at a predefined price and time in the future.
DIFX Exchange is planning to launch its futures market in the near future, so stay tuned!
Derivatives are financial contracts that are based on one or more assets. Futures contracts are a good example of derivatives that can be traded on a futures market.
The contract can be set between two or more parties and its price is determined by the fluctuations in the price of the underlying asset or assets. For example, Bitcoin Futures prices are calculated using the coin’s current price on spot exchanges.
A digital list of buy or sell orders on an exchange or trading platform.
Over-the-counter (OTC)
With OTC trading, you directly trade with another trader instead of using an exchange or broker as the middleman.
Exchange-Traded Fund (ETF)
An ETF is a basket of financial instruments that works just like a regular stock and can be traded on a traditional exchange. You may have heard about Bitcoin ETFs and how important they can be to the mass adoption of the coin. Here’s how it works:
A company buys Bitcoin or assets related to Bitcoin and then offers its share to traders and investors through an ETF on a regular exchange. In this way, everyone gets a chance to benefit from the crypto market, without the need to go through the relatively complicated process of buying and storing them.
It may be interesting to know that ProShares Bitcoin Strategy ETF, the first US-based bitcoin futures ETF, attracted over $1.2 billion in just 2 days.
Contract For Difference (CFD)
CFDs allow you to benefit from price movements of an asset without buying the actual asset. Here’s how they work:
Every CFD contract has a buy and sell price and the difference between the two is called the spread.
You analyze the market and buy or sell CFDs based on the direction you believe the market is headed.
If the market moves in your chosen direction, you make profits, otherwise, you may suffer a loss.
A portfolio is a basket of various financial assets, like cryptocurrencies, stocks, commodities, or cash, that can be managed by an individual investor, hedge fund, or other financial institutions.
Didn’t find the terms you were looking for? No worries. Let us know in the comments so we can cover it for you in our next episode.
You can also join our DIFX Academy to learn more about trading strategies, financial markets, crypto and blockchain fundamentals, and much more!