Futures & Crypto Trading Glossary
A reference guide to the essential terms used throughout the Futures Trading Academy. For key entries, a link points to the full explanatory article.
A
Ask Price
The lowest price at which a seller is willing to sell an asset in the market.
ATR (Average True Range)
A volatility indicator measuring the average true range across a set number of periods, typically 14. The true range for any bar is the greatest of: high minus low, high minus previous close, or previous close minus low. Used to calibrate stop-loss distances and assess current volatility relative to recent history. See Stop-Loss Strategies →
Available Margin
The remaining capital that can be used to open new positions.
B
Backtesting
Testing a trading strategy using historical market data to evaluate its performance. See Backtesting Your Trading Strategy →
Backwardation
A market condition in perpetual futures where the contract price trades below the spot price. During backwardation, shorts pay longs. See Funding Rates Explained →
Bid Price
The highest price a buyer is willing to pay for an asset.
Break-Even Point
The point at which total gains equal total losses.
C
Carry Cost
The ongoing cost of holding a leveraged position over time, primarily composed of funding rate payments in perpetual futures markets. See Funding Rates Explained →
Contango
A market condition in perpetual futures where the contract price trades above the spot price. During contango, long holders pay shorts to keep prices anchored to spot. See Funding Rates Explained →
Cross Margin
A margin mode where the full account balance is shared across all open positions to prevent individual liquidations. If one position's margin runs low, it draws from the remaining account balance. Contrasts with isolated margin. See How Leverage Works →
D
Drawdown
The decline in account balance from a peak to a lower point, usually measured in percentage terms.
E
Entry Price
The price at which a trade is opened.
Equity Curve
A chart showing account value over time.
Exit Price
The price at which a trade is closed.
Expectancy
The average expected return per trade over time.
F
Forward Testing
Testing a trading strategy in live market conditions.
Funding Interval
The frequency at which funding payments occur.
Funding Rate
A periodic payment exchanged between long and short traders in perpetual futures markets to keep prices aligned with the spot market. See Funding Rates Explained →
Futures Contract
A financial agreement to buy or sell an asset at a predetermined price in the future. In crypto, most are perpetual.
I
Imbalance
A situation where buy and sell pressure in the order book is uneven.
Index Price
An aggregated price derived from multiple exchanges, used as a reference for fair market value.
Initial Margin
The minimum amount of capital required to open a leveraged position.
Isolated Margin
Margin assigned to a single position only.
L
Leverage
The ability to control a larger position with a smaller amount of capital. See How Leverage Works →
Limit Order
An order placed at a specific price, executed only if the market reaches that price.
Liquidation
The forced closure of a position when the account can no longer support the required margin.
Liquidation Price
The price at which a position will be forcibly closed.
Liquidity
The ability to enter and exit positions without significantly affecting the price.
Long Position
A trade that profits when the price increases.
M
Maintenance Margin
The minimum account balance required to keep a position open.
Margin
The capital required to open and maintain a leveraged position.
Mark Price
A fair price used to calculate unrealized profit and loss and trigger liquidations.
Market Depth
The volume of buy and sell orders at different price levels.
Market Order
An order executed immediately at the best available market price.
Market Regime
The prevailing market condition that determines which trading strategies are most effective. The two primary regimes are trending (sustained directional movement) and ranging (price oscillating between defined levels). See Trend Following vs. Range Trading →
Max Drawdown
The largest observed loss from peak to lowest point over a period. See Risk Management and Drawdowns →
O
Open Interest
The total number of open contracts in the market.
Order Book
A real-time list of buy and sell orders in the market.
P
Perpetual Futures
A type of futures contract without an expiration date, commonly used in crypto trading. See Perpetual Futures Explained →
Position Size
The total size of a trade, measured in asset units or USD value. See Position Sizing Guide →
Post-Only Order
An order that ensures you add liquidity to the market rather than taking it.
Premium Index
The component of the funding rate formula that measures how much the perpetual price deviates from the spot index price. A positive premium means the perpetual trades above spot; negative means below. See Funding Rates Explained →
Profit Factor
The ratio of gross profits to gross losses across a set of trades. A profit factor above 1.5 is generally considered a sustainable edge; below 1.2, the margin may be too thin to survive real-world friction. See Backtesting Your Trading Strategy →
R
Realized PnL
Profit or loss after a position has been closed.
Reduce-Only Order
An order that only reduces or closes an existing position.
Risk per Trade
The maximum amount of capital a trader is willing to lose on a single trade.
Risk-Reward Ratio
The ratio between potential profit and potential loss in a trade.
R-Multiple
A normalized measure of trade performance relative to the predefined risk on a trade. A trade that profits twice the risked amount is +2R; a trade that hits the stop is -1R. R-multiples standardize performance comparison across different account sizes and position sizes. See The Trading Journal Guide →
S
Short Position
A trade that profits when the price decreases.
Slippage
The difference between the expected execution price and the actual price.
Spread
The difference between the bid price and the ask price.
Stop Distance
The difference between entry price and stop-loss.
Stop-Loss
An order that automatically closes a position to limit losses. See Stop-Loss Strategies →
Swing High
A price peak where the bar's high is greater than the highs of the surrounding bars. Used as a reference for stop placement, resistance zones, and trend structure analysis.
Swing Low
A price trough where the bar's low is less than the lows of surrounding bars. In an uptrend, each successive swing low should be higher than the previous one. Used as stop anchor points for long positions. See Stop-Loss Strategies →
T
Take-Profit
An order that closes a position when a predefined profit level is reached.
Trading Journal
A structured record of trades used for analysis and improvement. See The Trading Journal Guide →
Trailing Stop
A dynamic stop-loss that advances in the direction of a profitable trade, locking in gains as price moves favorably while keeping the position open as long as the trend continues. See Stop-Loss Strategies →
Trigger Order
An order that is activated when a specific price level is reached.
U
Unrealized PnL
Profit or loss on an open position that has not yet been closed.
V
Volatility
The degree of price fluctuation in a market over time.
W
Whipsaw
A rapid price reversal that triggers a stop-loss shortly after entry, producing a loss on a trade that initially appeared valid. Most common in choppy, low-trend market regimes and the primary failure mode of trend-following strategies during consolidation. See Trend Following vs. Range Trading →
Win Rate
The percentage of trades that are profitable over a given period.