Newcomers to the crypto space may all be a bit confused by the many different terms. Today, I’ll sort out some basic concepts in the crypto world for everyone. These things are simple to explain, but once you truly understand them, you can avoid a lot of detours.

First, let’s start with the most fundamental. What is fiat currency? In fact, it’s legal tender—currency issued by governments and backed by government credit, such as the Chinese yuan and the US dollar. When people in the crypto community talk about fiat trading, they mean exchanging this “real money” for virtual currencies.

Next is Token. Many people call it a token, but professionals prefer to say “security token.” The power of a Token is that it can digitize and record both real-world assets and virtual assets, something that traditional finance basically can’t do. Simply put, a Token is a type of proof of entitlement on the blockchain, representing some form of value.

Airdrops and candies are often confused. An airdrop is when a project team, for promotion, gives free tokens to token holders; the amount is usually proportional to your existing holdings. To get more airdrops, you need to hold more coins. Candies are free tokens given by a project to early users when it first launches—essentially a type of promotional move.

The term “price breakdown” is very important, especially during bull markets. It means a coin’s price falls below its issuance price, which is not a good signal for investors.

Private placement is an important way for project teams to raise funds. Unlike public offerings that are open to everyone, private placements are only for specific qualified investors and cannot be promoted openly. This is a common practice for early-stage fundraising.

When it comes to trading, there are now several mainstream exchanges, each with its own features. With so many trading platforms, when choosing, you should look at liquidity, security, and how rich the available trading pairs are. There are a few notable features of virtual currency trading: trading 24 hours a day without a shutdown, no daily price limit up/down restrictions, the smallest buy order can be as small as 0.0001BTC, and it uses a T+0 trading system—buy today and sell today. Compared with stocks’ T+1 settlement, the flexibility is indeed higher. There are also no time limits for withdrawals and converting to cash, and capital liquidity is especially strong.

The concept of a wallet is like your bank card. If you don’t trust an exchange, you can withdraw your coins to your own wallet. There are single-coin wallets, as well as multi-coin wallets—such as imToken, which allows you to store multiple coins.

Terms like positions, long positions, and short positions are all market jargon. In simple terms, long is bullish, while short is bearish. Good news and bad news are also easy to understand: good news is a message that pushes prices up, and bad news is a message that weighs on prices.

Public chains, private chains, and consortium chains are three different blockchain formats. Public chains like Bitcoin and Ethereum allow anyone to participate. Private chains have restricted write permissions and are more commonly used for enterprise applications. Consortium chains are maintained by multiple institutions, and financial institutions often use them.

There are various ways to describe market movement. A rebound is a short-term recovery during a downtrend; a pullback is a short-term drop during an uptrend; consolidation means the price remains relatively stable. “Brick-moving” refers to making money from price differences between different platforms, but you need to pay attention to the speed of transferring funds. Leveraged trading means using a small amount of capital to make a large trade; both gains and losses get amplified, somewhat like gambling.

Market orders and limit orders are two different order types. A market order executes immediately at the current market price. A limit order lets you set the price you want, and it only executes when the market reaches that price. The execution principle is “price first, time second.”

Wash trading, market manipulation, and price support are all ways that market makers operate. Wash trading is when they submit buy and sell quotes across multiple platforms to manipulate the coin’s price. Wash trading is to deliberately push the price lower to scare out retail traders. Price support is when large holders buy to prevent the coin price from falling.

Bull markets, bear markets, and “monkey markets” represent three different market states. A bull market is continuous broad-based gains and a sustained rise; a bear market is a continuous decline; a “monkey market” is jumpy up and down with hard-to-predict conditions. The “main rally” is the biggest surge within a bull market—if you catch it, you can make a lot of money. A falling market with slow declines (“bearish grind down”) is the hardest to endure: it looks like there’s a rebound, but overall it keeps falling. “Waterfall” and “well explosion” are two extremes: a waterfall is a sudden crash, while a well explosion is a long-suppressed breakout.

Absorbing the float, controlling the market, and “cutting” retail investors (“cutting weeds”) are market-maker playbooks. First, they scare retail traders out through wash trading; then they absorb the float and control the circulating supply; finally, they cut the weeds. “Scam lines” use candlestick charts to create false signals.

Position management is very important. Going all-in means converting all your money into coins. Averaging down means buying more of the falling coins to reduce your cost basis. Adding to your position means continuing to buy when the coin you’re bullish on is rising. Opening a position is starting to buy coins. Reducing a position is selling part of your holdings after you sense risk. Locking positions (in futures) means simultaneously opening both a long position and a short position. Being flat means only holding USDT and waiting. Light, heavy, and half positions refer to the different proportions of capital allocated.

Take profit and stop loss are crucial. Take profit means selling all once you reach your target gain. Stop loss means selling after losses reach a certain level to prevent further loss. Many beginners lose big because they don’t have a stop-loss mindset.

Sideways trading means the market doesn’t move much. A rebound is a recovery during a decline. A reversal is a real change in the overall trend. A V-shaped reversal is a rapid plunge to the bottom followed by a swift rise. Missing the boat is the most uncomfortable experience—when conditions are bad, you buy, but when the market starts moving up, you hesitate and watch from the sidelines. Being “trapped” means buying and then watching it keep falling; cutting losses is being forced to sell at a loss. Getting out of the trap means the price rises back after you got trapped.

Accumulating coins (“hoarding coins”) means being optimistic about a coin’s long-term development, buying in large amounts, and waiting for it to appreciate. Going long means buying with bullish expectations; going short means selling with bearish expectations, or borrowing coins to sell.

Mining is using computer-running programs to obtain digital currencies, but you need to be aware that it can wear out equipment. ICO is a fundraising method for blockchain projects, derived from the IPO concept in stocks. A private round is fundraising targeted at specific groups of people; an angel round is investment by individual investors into an early-stage startup.

These concepts may sound like a lot at first, but once you start using them, they become familiar. The most important thing is to understand the underlying logic—don’t blindly follow trends. The most common mistake beginners make is not having a risk awareness. It’s recommended to start by practicing with a small amount of money, and only add to your position once you truly understand the market.