Trading Glossary

A refresher.

Trading Basics

Glossary

  • Order Book: A list of buy and sell orders for a particular asset, organized by price and quantity.

  • Liquidity: The availability of assets for trading on the exchange.

  • Spread: The difference between the highest bid price and the lowest ask price.

  • Taker Fee: Fee charged for executing orders that remove liquidity from the order book.

  • Maker Fee: Fee charged for placing orders that add liquidity to the order book.

  • Maintenance Margin: Minimum collateral required to avoid liquidation.

  • Initial Margin: Collateral required to open a position.

  • Funding Fee: Periodic payment to ensure perpetual contracts remain fairly priced.

  • Mark Price: Reference price for perpetual contracts, derived from spot exchanges.

  • Index Price: Volume-weighted average price of the underlying asset on major spot exchanges.

  • Liquidation: Forced closure of a position due to insufficient margin.

  • Auto De-leveraging (ADL): Mechanism to liquidate positions when margin falls below a certain level.

Perpetual Futures Trading

Perpetual Futures (Perps) contracts allow traders to speculate on price movements with leverage, without owning the underlying asset. Key advantages include:

  • Long or Short Positions: Profit from price movements in either direction.

  • Leverage: Increase capital efficiency by trading with leverage.

  • Liquidity: Access deeper liquidity compared to spot trading.

Order Types

We support various order types to cater to different trading strategies:

  • Market Order: Executes immediately at the current market price.

  • Immediate or Cancel (IOC): Executes immediately and cancels any unfilled portion.

  • Fill or Kill (FOK): Executes fully at the specified price or cancels the order.

  • Post Only: Ensures the order is added to the order book without executing immediately.

  • Reduce Only: Reduces an existing position without increasing it.

Trading Fees

Trading fees are charged as a percentage of the transaction value, with different rates for maker and taker orders.

Perpetual Futures Basics

Margin, Leverage, and PnL

  • Notional Value: Total position size in USDC value.

  • Account Margin Ratio: Total collateral value divided by the total open notional.

  • Initial Margin Ratio: Required margin to open a position or withdraw funds.

  • Maintenance Margin Ratio: Required margin to avoid liquidation.

  • PnL (Profit and Loss): Realized and unrealized profits or losses from open positions.

Funding Rate

Funding fees are periodically exchanged between long and short positions to ensure the futures price closely follows the underlying asset price. The rate is determined by the premium and interest rate components, adjusted every 8 hours.

Liquidations

Accounts are subject to liquidation if their margin ratio falls below the maintenance margin requirement. Liquidations are decentralized, with positions transferred to liquidators at a discount instead of being market sold.

Insurance Fund and ADL

Our Insurance Fund protects against insolvency by covering losses from bankrupt traders. In extreme cases, Auto-Deleveraging (ADL) is triggered to offset positions, ensuring the fund remains solvent.

Risk Management and Safety Measures

Margin Requirements

  • Initial Margin: The collateral required to open a new position.

  • Maintenance Margin: The minimum collateral required to keep a position open.

Liquidation Process

  • Liquidation Trigger: If your account margin ratio falls below the maintenance margin ratio, your positions will be subject to liquidation.

  • Decentralized Liquidations: Positions are transferred to liquidators at a discount, rather than being sold on the orderbook.

Insurance Fund

  • Purpose: Protects against insolvency by covering losses from bankrupt traders.

  • Growth: Funded by liquidation fees, it grows over time to ensure stability during extreme market conditions.

  • ADL (Auto-Deleveraging): Triggered if liquidators don’t take over positions and the insurance fund's margin ratio falls below a critical level.

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