Perpetual futures trading comes with its own set of terms and concepts. If you’re new to the space, understanding this vocabulary is key to feeling confident and in control while trading. Below, we’ve compiled a list of essential terms used when trading perpetual futures, explained in a clear and beginner-friendly way.
🔹 Perpetual futures
A type of derivative contract that allows traders to gain exposure to the price of an asset - like Bitcoin - without owning it. Unlike traditional futures, perpetual futures have no expiration date, so positions can be held indefinitely.
🔹 Leverage
Leverage lets you open a larger position than the balance in your account. For example, with 2x leverage, a €500 balance allows you to trade €1,000 worth of contracts. It amplifies both potential gains and losses.
🔹 Margin
The amount of collateral required to open or maintain a position. There are two common types:
- Initial Margin: Minimum amount of collateral needed to enter into a position.
- Margin Threshold / Maintenance Margin: Minimum amount of collateral required to keep an open position from being liquidated.
🔹 Liquidation
If the market moves against your position and your available margin drops below the maintenance margin, your position may be automatically reduced by being terminated in part or in full. Please refer to the process described in Rule 11.4 of ONEX Rulebook.
🔹 Funding rate
Since perpetual contracts don’t expire, a funding rate helps align the price of the perpetual contract with the spot price, as represented by a regulated benchmark.
🔹 Long vs. Short
- Going Long: You want to gain exposure to the increase in price of the underlying asset and buy the contract.
- Going Short: You want to gain exposure to the decrease in price of the underlying asset and sell the contract.
🔹 PnL (Profit and Loss)
The result of your trade.
- Unrealized PnL: Gains or losses while your position is still open.
- Crystallized PnL: Partial realization of profits or losses during the trade, due to One Trading’s real-time settlement process.
- Realized PnL: Final profit or loss after you close the position.
🔹 We offer the following order types (please refer to the ONEX Rulebook for definitions)
- Market Order
- Limit Order
- Move Order
- Stop Order
🔹 Maker vs. Taker
- Maker: Adds liquidity by placing limit orders that don’t fill immediately.
- Taker: Removes liquidity by placing orders that get filled immediately.
- Fees are usually lower for makers than takers.
Getting comfortable with these terms is a great first step in your trading journey. The more you understand, the better equipped you’ll be to manage your risk, make informed decisions, and use One Trading’s perpetual futures platform effectively.
Investing involves risks. The value of investments can go up as well as down and you may receive back less than your original investment or lose your entire investment. Investing with leverage means the value of your investment fluctuates more than the price of the underlying asset. One Trading does not provide investment advice and investors should make their own decisions or seek independent advice.