Crypto Trading Glossary
Clear, concise definitions of the most commonly used terms in crypto futures trading. A comprehensive reference for traders of all levels.
Ask Price
The lowest price at which a seller is willing to sell an asset. In an order book, the ask price represents the best available price for buyers. The difference between the ask and bid price is called the spread.
ATR
Average True Range — a volatility indicator that measures the average range of price movement over a set period. Traders use ATR to set dynamic stop-loss levels and gauge how much an asset typically moves.
Backtest
The process of testing a trading strategy against historical price data to evaluate how it would have performed. Backtesting helps traders refine strategies before risking real capital.
Bear Market
A prolonged period of declining prices, typically defined as a drop of 20% or more from recent highs. Bear markets are characterized by pessimism, reduced trading volume, and capitulation selling.
Bull Market
A sustained period of rising prices and optimistic market sentiment. Bull markets are characterized by increasing trading volume, positive news flow, and growing investor confidence.
Candlestick
A chart element that displays the open, high, low, and close prices for a specific time period. Green/white candles indicate the close was above the open (bullish), while red/black candles indicate the close was below the open (bearish).
Cross Margin
A margin mode where your entire available account balance is used as collateral for open positions. This lowers liquidation risk but means losses on one position can affect your whole account.
Related Guide →DCA
Dollar Cost Averaging — an investment strategy where you divide a total investment into periodic purchases to reduce the impact of volatility. Instead of entering one large position, you spread your entries over time or price levels.
Related Guide →Drawdown
The peak-to-trough decline in account value, expressed as a percentage. For example, if your account drops from $10,000 to $7,000, the drawdown is 30%. Maximum drawdown is a key risk metric.
Entry Price
The price at which a trade is opened. For a long position, it is the buy price; for a short position, it is the sell price. Accurate entry price is critical for calculating position size, PnL, and liquidation levels.
Exit Price
The price at which a trade is closed, either by hitting a take profit, stop loss, or manual close. The difference between entry and exit price determines the profit or loss of the trade.
Fee
The cost charged by an exchange for executing a trade. Fees are typically split into maker fees (for limit orders that add liquidity) and taker fees (for market orders that remove liquidity). Fees directly reduce your PnL.
Funding Rate
A periodic payment exchanged between long and short traders in perpetual futures markets. When the funding rate is positive, longs pay shorts; when negative, shorts pay longs. It keeps perpetual prices anchored to spot.
Related Guide →Futures
Derivative contracts that obligate the buyer to purchase (or seller to sell) an asset at a predetermined price at a future date. In crypto, perpetual futures have no expiry date and use funding rates to track spot prices.
Hedge
A risk management strategy that involves opening a position to offset potential losses in another position. For example, opening a short futures position to protect a long spot holding during uncertainty.
Isolated Margin
A margin mode where only a specific amount of collateral is allocated to a single position. If the position is liquidated, only the isolated margin is lost — the rest of your account remains safe.
Related Guide →Leverage
A multiplier that allows you to control a larger position with a smaller amount of capital. For example, 10x leverage means $100 controls a $1,000 position. Higher leverage amplifies both gains and losses.
Related Guide →Limit Order
An order to buy or sell at a specific price or better. Limit orders are only executed when the market reaches your specified price. They typically have lower fees (maker fees) and give you more control over entry/exit prices.
Liquidation
The forced closure of a leveraged position when the margin balance falls below the maintenance margin requirement. When liquidated, traders lose their margin (collateral). Proper position sizing and stop losses help avoid liquidation.
Related Guide →Long
A position that profits when the price of an asset increases. Going long means buying with the expectation that the price will rise. In futures, you can open a long position with leverage to amplify potential gains.
Margin
The collateral required to open and maintain a leveraged position. Initial margin is the amount needed to open the position, while maintenance margin is the minimum required to keep it open.
Market Order
An order to buy or sell immediately at the best available price. Market orders guarantee execution but not the exact price, which may differ from the displayed price due to slippage, especially in low-liquidity markets.
PnL
Profit and Loss — the financial result of a trade or portfolio. Unrealized PnL is the current gain/loss of an open position, while realized PnL is the final result after closing. PnL can be calculated before or after fees.
Position Size
The total value of a trade, calculated based on your risk tolerance, entry price, and stop loss level. Proper position sizing ensures no single trade can cause catastrophic loss to your account.
Related Guide →R/R Ratio
Risk/Reward Ratio — compares the potential loss to the potential profit of a trade. A 1:3 R/R means risking $1 to potentially make $3. Higher R/R ratios allow you to be profitable even with a lower win rate.
Related Guide →Scalping
A high-frequency trading style that aims to profit from very small price movements. Scalpers typically hold positions for seconds to minutes, making many trades per day with tight stop losses and small targets.
Short
A position that profits when the price of an asset decreases. Going short means selling (or borrowing and selling) with the expectation that the price will fall, allowing you to buy back at a lower price.
Slippage
The difference between the expected price of a trade and the actual execution price. Slippage occurs during high volatility or low liquidity, and is more common with market orders and large position sizes.
Spot
A market where assets are bought and sold for immediate delivery at the current market price. Spot trading involves owning the actual asset, unlike futures where you trade contracts. There is no leverage or liquidation risk in spot.
Stop Loss
An order that automatically closes a position at a predetermined price to limit losses. A well-placed stop loss protects your capital without being too tight (getting stopped out) or too wide (taking excessive loss).
Related Guide →Swing Trading
A trading style that aims to capture price swings over days to weeks. Swing traders use technical and fundamental analysis to identify medium-term trends, holding positions longer than day traders but shorter than investors.
Take Profit
An order that automatically closes a position at a predetermined price to lock in gains. Setting take profit levels before entering a trade is essential for disciplined trading and maintaining a consistent R/R ratio.
Trailing Stop
A dynamic stop loss that automatically follows the price in your favor by a set distance or percentage. If the price reverses, the trailing stop stays in place and closes the position, locking in profits while letting winners run.
Related Guide →Volatility
A measure of how much and how quickly the price of an asset changes. High volatility means larger and faster price swings, creating both opportunity and risk. Indicators like ATR and Bollinger Bands help measure volatility.
Volume
The total number of units of an asset traded during a given time period. High volume confirms price movements and indicates strong market interest, while low volume may signal weak conviction or potential reversals.
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