Atomic Swaps, DEX, OTC, Limit Order, Stop-Loss, Fill-or-Kill, Margin Trading & Wash Trading Explained

Welcome to another edition of my short series “Crypto Jargon”

In this article I will break down the following terms:

• Wash trading
• OTC
• Limit order
• Fill or Kill order
• Stop order
• Margin trading
• Atomic swaps
• DEX

I’m going to start with OTC which is an acronym for Over-the-counter, which is a term for Off-Exchange Trading. In other words, trades that occur peer-to-peer (between two parties) rather than using an exchange platform. Orders are not listed on a public order book. Clients can trade with each other via a broker or another third party without anyone else knowing about their transactions. An OTC trade can be done at market value or a different price, negotiated between the two parties involved in the trade.

Limit Order, on the other hand, is an order placed on an exchange, to buy or sell a cryptocurrency when its value reaches a certain price point. That means you decide what price you want the order to be executed at and it can stay open for a long period of time until the price parameters are reached so that it gets fulfilled.
The opposite of this is a “Fill or Kill” order which must be executed immediately or it gets cancelled.

Stop Loss-order (or Stop Order) is designed to limit a trader’s loss. It gets triggered at a certain price point and gets executed if the desired parameters are reached. For instance, if you buy a certain asset or coin at $5 and the price doesn’t go in the direction you expected, you would have a stop loss at $4 or maybe at $4.50. So that if there’s a decline in the value of this asset, you sell at a small loss before it dips by another 20-30% which is not unusual in the crypto market. Setting a stop-loss order for 10% below the price you paid is a common practice and traders often establish a stop-loss order as soon as they make a purchase to protect themselves against bigger losses.

Margin Trading means the act of adding leverage to your trades. When margin trading, you borrow money against your current funds to trade cryptocurrency “on margin” on an exchange. In other words, you are borrowing money to increase your buying power (generally you pay interest on the amount borrowed, but not always). Imagine you work on 10x leverage, that means you own 1 bitcoin but you borrow the rest and now you place buy or sell orders for 10 bitcoins. When you get it right, you make 10 times the money you actually have but if you lose, you now have covered the borrowed amount and pay it out of your own pocket, so it is considered high risk and can be very profitable or a complete disaster and there are very few exchanges that offer margin trading for crypto.

Wash Trading is an illegal form of price manipulation in which a trader simultaneously places sell and buy orders to artificially increase trading volume and thus the asset?s price. In effect, traders are fraudulently buying and selling assets to themselves with the intention to create fake impression of higher demand. Many times this involves automated software, known as bots which place multiple orders simultaneously.

Atomic Swap is a decentralised smart contract technology which enables direct exchange of one cryptocurrency for another without the need of an intermediary. Anonymous by default, these are highly regarded in the crypto community but still not used very much due to lack of liquidity.

Lastly, Dex is short for a Decentralised Exchange is these type of exchanges are still in their infancy but with a lot of attention and great expectations in the crypto community. They are billed to be a big business in the coming years, some of the more well-known ones are Changelly, Bitshares, Barterdex, Altcoin.io, Waves and Binance DEX.

As you probably know I also post these definitions on my YouTube channel, here’s my episode with today’s terms:

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These and many more terms are explained in my eBook “Crypto Jargon A-Z: definitions of crypto terminology” which is the most up-to-date publication of its kind. With over 700 terms, acronyms and trading slang, it contains everything related to cryptocurrencies and blockchain tech: a must-have guide for every crypto investor. It’s an Amazon bestseller and it’s available from my website here.

Go to http://www.ojjordan.com/cryptocorner and grab your digital copy today.

 

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