Short, clear answers to the most common questions about the cryptocurrency market.
Risk management means limiting the amount you could lose on any single trade, usually by setting a stop loss and an appropriate position size before entering. Without risk management, even a good strategy can eventually wipe out your capital.
A stop loss is a price level at which a trade closes automatically to prevent further loss. Setting a stop loss before entering a trade is one of the most basic principles of risk management.
A take profit is a price level a trader sets in advance to lock in gains once the price reaches it. It helps avoid the emotional decision of staying in a winning trade too long.
The risk-to-reward ratio shows how much potential profit you expect for each unit of risk you take; for example, a 1:3 ratio means risking one unit for three times the potential reward. Respecting this ratio can keep you profitable in the long run even with a win rate below 50%.
Technical analysis is the study of price charts, patterns, and indicators to identify good entry and exit points. It focuses on past price behavior and trading volume rather than an asset's underlying value.
Fundamental analysis means evaluating a project's true value through factors like its team, whitepaper, real-world token use case, and competitors. It's used mainly for long-term investment decisions.
Chart patterns are recurring shapes in price movement — such as triangles, head and shoulders, or flags — that traders use to anticipate a possible continuation or reversal of the trend. No pattern is ever 100% reliable and should be checked alongside other tools.
Momentum indicators like RSI or MACD measure the speed and strength of price movement to show whether a trend is losing steam or still strong. They're usually used alongside overall trend analysis, not on their own.
A moving average calculates an asset's average price over a set period, smoothing out short-term volatility to reveal the underlying trend. Crossovers between short-term and long-term moving averages are among the most common entry and exit signals.
RSI, or Relative Strength Index, is a number between 0 and 100 that shows whether an asset is in overbought or oversold territory. A reading above 70 is generally considered overbought and below 30 oversold, though these numbers aren't absolute.