Crypto Trading and Markets Flashcards
7 cards from real Cryptocurrency practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Crypto Trading and Markets flashcards as text
What does the Relative Strength Index (RSI) measure in crypto technical analysis?
Answer: The speed and magnitude of recent price changes to evaluate overbought/oversold conditions
RSI is a momentum oscillator ranging from 0 to 100 that signals overbought conditions above 70 and oversold conditions below 30.
What is a 'short squeeze' in cryptocurrency trading?
Answer: A rapid price increase that forces short sellers to buy back, accelerating the rally
A short squeeze happens when a rising price forces traders with short positions to buy back the asset to cover losses, further driving the price up.
On a crypto exchange, what is the 'spread'?
Answer: The difference between the highest bid price and the lowest ask price
The spread is the gap between what buyers are willing to pay (bid) and what sellers are asking (ask), representing an implicit transaction cost.
What is 'FOMO' and how does it typically affect crypto markets?
Answer: Fear Of Missing Out; it drives emotional buying during rallies, often inflating bubbles
FOMO (Fear Of Missing Out) leads retail investors to buy impulsively during price surges, contributing to parabolic price moves and subsequent crashes.
What is the purpose of a 'stop-loss order' in crypto trading?
Answer: To automatically sell an asset if its price falls to a predetermined level to limit losses
A stop-loss order triggers a sell (or buy for shorts) once the price hits a specified level, capping potential losses on a trade.
What does 'liquidity mining' in DeFi typically involve?
Answer: Providing assets to a DEX liquidity pool in exchange for trading fee rewards and tokens
Liquidity mining rewards users who supply assets to decentralized exchange pools with a share of trading fees and often additional protocol tokens.
In cryptocurrency futures, what does 'contango' describe?
Answer: A futures price trading above the spot price, implying bullish sentiment
Contango occurs when futures prices are higher than the current spot price, typically reflecting market expectations of future price appreciation or cost of carry.