Trading Terminology: Sound Like A Pro

“BTC just hit the 0.618 Fib retracement!” 

“ETH’s forming a cup and handle!”

 “That head and shoulders looks bearish, bruh.” 

You can read those words… but what does any of that actually mean?

While it’s not going to be the thing that sends your bag to the moon, knowing what these phrases mean is useful. For one thing, you’ll know what people are talking about! But more importantly, you can recognize these patterns in practice and make BETTER DECISIONS. 

The Classics. The Go-To’s. Your Day-To-Day Chart Patterns

First up we have the much loved: “Head and Shoulders”.

Quite a common pattern on our charts, it looks like a peak (the head) flanked by two smaller peaks (shoulders). When the price breaks below the “neckline” (the support level connecting the lows), it’s like the market’s saying, “We’re done here.” You might have also heard of the inverse Head and Shoulders? Same idea, but flipped on its head… and shoulders. A lot of traders will tell you this is a juicy buy signal. 

Then we move along to our “Cup and Handle”, which looks exactly like it sounds: a smooth U-shaped dip (the cup) followed by a tiny consolidation (the handle). This is the market’s way of catching its breath before (big maybe) launching upward. When you see these, people like to think it’s a bullish sign. But as we have said more than once, charts aren’t a magic ball, they’re just a sign of what could potentially happen.

And finally we have our “Double Top/Bottom”.

This is a good indicator that the market’s in an indecisive phase. Two failed attempts to break resistance (top) or support (bottom) = trend exhaustion. Translation: time to change direction.

That’s a ‘Double Top’, by the way. The Double Bottom looks like the opposite.

What The Fibonacci?

Fibonacci retracements are one of those times where trading gets weirdly mystical. 

Based on a 13th-century math sequence (0, 1, 1, 2, 3, 5, 8…), traders use these ratios (23.6%, 38.2%, 61.8%) to predict pullback levels. If BTC drops after a rally, they’ll eyeball the 0.618 Fib level like it’s a sacred floor. 

Does it always work? No, otherwise we’d all be rich. 

But enough traders believe in it that it becomes a self-fulfilling prophecy.

Support and Resistance

Support is the price floor where buyers hop in. Whereas the resistance is the ceiling where sellers sell and take their profits. It’s a psychological barrier really. 

If you ‘break through’ the resistance, it often becomes new support. If a token fails to hold its support, then it can falter and fall even low. 

Indicators

Indicators come in all different flavors; they’re a way to help make sense of what’s happening. Again, not a crystal ball - just a rough guide.

 There’s the Relative Strength Index, or RSI. This is like the market’s mood ring. It measures how overbought or oversold an asset is on a scale from 0 to 100. When an RSI climbs above 70, it’s saying “overbought” – meaning the asset might be due for a pullback. 

Below 30? “Oversold” and potentially ripe for a bounce. 

Then there’s MACD – the Moving Average Convergence Divergence. This one’s all about momentum, using two lines that dance around each other like they’re in a complicated relationship. When the faster line crosses above the slower one, it’s called a golden cross. Publications love to say print headlines like “‘insert crypto coin’ has golden cross moment, time to buy?” And then that coin do nothing. That’s because there are no guarantees.

When it crosses below that line it’s called a death cross, which is a bearish omen that usually brings similar style headlines. Traders watch these crosses like hawks, though sometimes the market decides to fake everyone out and do the exact opposite of what the MACD suggests.

Then there’s Bollinger Bands, which are like the market’s stress levels. Picture a simple moving average with two bands above and below it. When these bands squeeze tight, it’s like the market is holding its breath – volatility is coming, and it’s usually big. When the bands are wide apart, that’s the market having a full-blown tantrum with wild price swings. 

Does This All Matter?

At this point you might be wondering: “Do I really need to know all this?” Here’s the thing – crypto markets are driven by psychology as much as fundamentals. When enough traders believe in these patterns and indicators, they become self-fulfilling prophecies. 

That head and shoulders pattern works because enough people see it and act on it. That Fibonacci level holds because enough traders place their orders there.

Understanding this stuff gives you a framework to make sense of price action beyond just gut feeling. It helps you spot when the market might be getting overheated (like when RSI is screaming overbought while price is making new highs). It lets you identify potential reversal points (like when price approaches that key resistance level for the third time). 

Most importantly, it helps you avoid classic rookie mistakes like fomo-ing in at the top of a pump, or panic-selling at the bottom of a dump.

But for the last time: none of this is magic!

These tools are like a weather forecast – they can tell you when conditions are ripe for a storm, but they don’t guarantee it’s gonna rain.