Cryptocurrency Trading & Investment Flashcards
7 cards from real CCE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cryptocurrency Trading & Investment flashcards as text
What is the Relative Strength Index (RSI) primarily used to identify?
Answer: Overbought or oversold conditions in a market
RSI is a momentum oscillator that ranges from 0 to 100; readings above 70 suggest overbought conditions and below 30 suggest oversold conditions.
Which risk management concept describes spreading investment across multiple uncorrelated crypto assets?
Answer: Diversification
Diversification reduces unsystematic risk by allocating capital across assets whose prices do not move in perfect correlation.
What is 'funding rate' in perpetual futures contracts?
Answer: A periodic payment between long and short traders to keep contract price near spot
Funding rates are periodic payments exchanged between long and short holders of perpetual contracts to anchor the contract price to the underlying spot price.
Which chart pattern is characterized by two peaks at roughly the same price level separated by a trough?
Answer: Double top
A double top is a bearish reversal pattern featuring two consecutive peaks at similar highs, suggesting the asset is failing to break above resistance.
In cryptocurrency portfolio management, what does 'rebalancing' accomplish?
Answer: Restoring target asset weightings after price movements shift allocations
Rebalancing involves selling outperforming assets and buying underperforming ones to restore the portfolio to its original target allocation percentages.
What does high open interest in a futures market typically indicate?
Answer: A large number of active unsettled contracts in the market
Open interest reflects the total number of outstanding futures contracts that have not been settled, indicating the depth of market participation and conviction.
Which trading strategy profits from price differences of the same asset on two different exchanges?
Answer: Cross-exchange arbitrage
Cross-exchange arbitrage exploits temporary price discrepancies for the same cryptocurrency listed on multiple exchanges by simultaneously buying low on one and selling high on another.