Financial Terminology Explained: A Guide to Investment Vocabulary from Stocks to Crypto Assets

When investment newbies enter the financial market, they often encounter many professional terms that can be confusing. Understanding these terms not only helps you communicate effectively with other investors but also enhances your investment decision-making ability. This article will introduce the main terms of the traditional stock market and supplement relevant Crypto Assets market concepts where appropriate, providing you with a complete foundation of financial vocabulary.

Market Participants and Basic Concepts

Newbie: Refers to individual investors who invest relatively small amounts of capital. In the Crypto Assets market, Newbies also account for a significant portion of trading volume, and the entry barrier is usually lower than that of the traditional stock market.

Whale: Investors who buy and sell financial assets using a large amount of capital. In the crypto market, whales are often referred to as “whales” (Whale), and their trading behavior can lead to significant market fluctuations.

Market Maker: Institutions or large investors that can influence the market trends of specific stocks. In the crypto market, certain teams or individuals holding a large amount of coins can also play a similar role, affecting the price trends of the coins.

Whales: Large investors who can influence the price trends of a single or multiple financial assets, or even the overall market. In the crypto market, whales include major trading platforms, investment funds, and project founding teams.

Retail Investors: Refers to investors who frequently follow trends in trading and often incur losses. The high volatility of the crypto market makes many investors who lack research and risk management more likely to become “retail investors.”

Market Sentiment and Trend Terminology

Bull Market: A long-term trend where the overall market is bullish and prices continue to rise. The bull market for Crypto Assets typically has greater volatility, with price increases potentially reaching several times that of traditional markets.

Bear Market: A long-term trend where the overall market is bearish and prices continue to decline. The bear market for Crypto Assets can also be more severe, with coin prices often falling more than in traditional markets.

Bull: Investors who predict that prices will rise and adopt a buying strategy. In the derivatives trading of the crypto market, bulls can also amplify their profits through leverage.

Short: Investors who predict that the price will drop and adopt a selling strategy. The perpetual contracts in the crypto market make short selling more convenient.

Going Long: The operation of buying assets in anticipation of profit from price increases. On mainstream trading platforms, investors can go long on crypto assets through the spot or futures market.

Short Selling: Borrowing assets from a broker and selling them, then buying them back at a lower price to return them and profit from the difference. The perpetual contracts in the crypto market provide a more convenient mechanism for short selling.

Short Squeeze: A phenomenon where prices rise despite bearish expectations of a decline, forcing short sellers to cover their positions, which leads to further price increases. In 2021, classic short squeeze cases were observed in GME stock and certain crypto assets.

Price Action and Trading Restrictions

Limit Up: The stock price rises to the maximum limit set by the exchange, such as a daily maximum increase of 10% in the Taiwan stock market. Most crypto markets do not have limits on price fluctuations, so daily volatility can be extremely severe.

Limit Down: The stock price falls to the minimum limit set by the exchange. The lack of such restrictions in the crypto market is part of its high-risk characteristics.

Suspension: A measure taken by the exchange to halt trading of a certain stock. Crypto trading platforms may also implement a “trading suspension” mechanism in extreme market conditions, but the frequency and standards differ from traditional markets.

Theme: Reasons for speculating on assets, such as news, rumors, or policies. The themes in the crypto market are more diverse, including technological upgrades, updates to token economic models, ecological expansion, etc.

Sector: A group of stocks with similar characteristics. The crypto market also has similar concepts, such as DeFi sector, GameFi sector, Layer 1 public chain sector, etc.

Asset Type Classification

Blue chip stocks: Stocks of large companies with outstanding profitability and stable operations. In the crypto market, Bitcoin and Ethereum are often regarded as “blue chip coins,” with relatively high market recognition and stability.

Growth Stocks: Stocks of companies that have the potential for rapid growth. Emerging protocols and innovative projects in the crypto market can be seen as similar high-growth assets.

Penny Stocks: Stocks of companies with poor development prospects. The crypto market has a lot of tokens that lack substantial value and application scenarios, posing higher risks.

Leading Stocks: Stocks that have a leading role in the market. In the crypto field, each sub-sector also has its own leading tokens, such as in the areas of DeFi, NFTs, etc.

Large-cap stocks: Stocks with a market capitalization typically over $10 billion. In the crypto market, Bitcoin and Ethereum are undoubtedly the representatives of large-cap coins.

Small-cap stocks: Stocks with a market capitalization typically under $2 billion. There are many small-cap coins in the crypto market, which have greater volatility and present both risks and opportunities.

Trading Behavior Terminology

Chasing Up: The action of buying when the price starts to rise. The cryptocurrency market is highly volatile, and chasing up carries higher risks, so caution is required.

Panic Selling: The act of selling when prices begin to decline. Panic selling is more common during significant downturns in the crypto market when fear is prevalent.

Bottom Fishing: The operation of buying when predicting that the price will stop falling and start to rise after a significant decline. The bottom of the crypto market is usually more difficult to judge, and the risk of bottom fishing is higher.

Missing Out: The market rises, but due to not holding assets, profit opportunities are missed. The explosive rise of the crypto bull market may make the cost of missing out even higher.

Diving: A phenomenon where the price suddenly and rapidly declines significantly. The liquidity in the crypto market is relatively low, making the diving phenomenon more common and more pronounced.

Key Terms in Technical Analysis

Technical Analysis: Analyzing the market through price trends, trading volume, technical indicators, and other data. The continuous 24/7 trading nature of the crypto market makes technical analysis more challenging.

Correction: A short-term decline during a price increase. The crypto market can experience significant corrections of 30-40% even in a strong bull market.

Rebound: A short-term recovery in a downtrend of prices. In a crypto bear market, there are also often significant rebound trends, but they may be a “dead cat bounce” phenomenon.

Pullback: The phenomenon of the price returning to the breakout level to test support or resistance after breaking through. In the crypto market, pullback amplitudes are often larger, requiring wider stop-loss settings.

Gap: A price discontinuity appears on the chart. Due to the 24/7 trading in the crypto market, pure gap phenomena are relatively rare, but significant price fluctuations are common.

Reversal: The direction of the price trend has fundamentally changed. The reversal in the crypto market can be more sudden and dramatic.

Fundamental Analysis Terms

Fundamentals: Including macroeconomics and the basic situation of enterprises. The fundamental analysis of Crypto Assets needs to consider factors such as technological development progress, network activity, token economic model, etc.

Financial Report: A financial status report regularly published by a company. Crypto projects typically do not have traditional financial reports, but there are transparent on-chain data and community governance reports.

Earnings Per Share ( EPS ): The ratio of the company's net profit after tax divided by the number of outstanding shares. Although there are no similar indicators for crypto projects, there are alternative indicators such as revenue from agreements and token burn rates.

Price-to-Earnings Ratio ( PE ): The ratio of the stock price to earnings per share, used to assess the valuation of a stock. Alternative metrics commonly used in crypto assets include Market Cap/Total Locked Value ( TVL ), etc.

Price-to-Book Ratio ( PB ): The ratio of the stock price to the net asset value per share. Crypto projects can refer to similar ratios such as market cap/reserve assets.

Risk Management Terminology

Systemic Risk: Risk factors that affect the entire market, such as policy changes, interest rate fluctuations, etc. The systemic risks in the crypto market also include regulatory policy changes and underlying security issues of the blockchain.

Non-systematic risk: Risk factors that affect individual assets, such as operational risks of a company. The non-systematic risks of crypto projects include code vulnerabilities, team dissolution, governance disputes, etc.

Volatility: A measure of the degree of price movement of an asset. The volatility of crypto assets is usually much higher than that of traditional stocks, and investment strategies need to be adjusted accordingly.

Stop Loss: A risk management strategy that limits investment losses. Setting stop loss orders on crypto trading platforms is particularly important as it helps to control risks in a highly volatile environment.

Dividend Stocks: A long-term investment strategy that involves holding stocks and profiting from dividends. A similar concept in the crypto space is staking ( Staking ), which involves locking tokens to receive network rewards.

Terminology Unique to the Crypto Market

HODL: Originating from a misspelling of “Hold”, it refers to the strategy of holding Crypto Assets long-term without selling, similar to the value investing concept in the stock market.

Mining: The process of participating in the maintenance of the blockchain network through computer calculations and earning token rewards, which is a unique asset generation mechanism of Crypto Assets.

Smart Contract: A code protocol that executes automatically on the blockchain, serving as the foundation for the functionality of many Crypto Assets projects.

DeFi: Decentralized Finance, referring to financial services that do not rely on traditional intermediaries, including lending, trading, and asset management.

On-chain Analysis: A method to understand the flow and usage of Crypto Assets by analyzing publicly available blockchain data, similar to fund flow analysis in traditional finance.

Understanding these financial terms will help you better comprehend the market operation mechanisms, whether in the traditional stock market or the emerging Crypto Assets field. With a grasp of these fundamental concepts, you will be able to make investment decisions more confidently and communicate effectively with other market participants.