메인Bitcoin Futures trading GuideUnderstanding the Meanings of More Than 10 Bitcoin Futures Trading Terms

Understanding the Meanings of More Than 10 Bitcoin Futures Trading Terms

Bitcoin Futures Trading Terms Summary

The basic terms used in Bitcoin futures trading are essential to know before starting to trade. Starting without any knowledge can lead to disappointments. In this post, we will spend time understanding the most basic and frequently mentioned terms.

What is Bitcoin Futures Trading?

Bitcoin futures trading is about buying and selling contracts for future price values. It’s a representative platform among coin derivative products. It provides various specialized order modes that are a bit more advanced than simple spot trading.

Understanding Trading Pairs

Understanding Trading Pairs

Bitcoin futures trading pair terms are marked as ‘Futures’ as shown in the image.

The terms BTC/USDT, ETH/USDT mean Bitcoin futures trading or Ethereum futures trading using USDT Tethercoin.

the Binance exchange, it is indicated as USD-M Futures.

Liquidation

Coin futures liquidation is a system where the ordered futures position is forcibly liquidated (canceled) when the liquidation price is exceeded or the margin ratio reaches 100%.

For example, if you entered a long position with 1,000 USDT, and sudden price drops lead to forced liquidation, it means that the 1,000 USDT amount disappears in an instant.

Because of this futures liquidation system, there are almost no high-stake betters, and most invest around 500 to 1000 dollars.

On the other hand, a high amount investment has the advantage of earning enormous profits in a short time.

Leverage

Leverage

Coin futures leverage is a system that allows you to invest more money. The exchange lends the leverage, and in return, asks for more trading fees or increases the standard for forced liquidation.

For instance, if you have 1,000 USDT in your futures wallet and long buy a specific futures coin with 10x leverage, you can invest in futures with 10,000 USDT.

If the coin price rises by just 5%, you can gain a profit of 500 dollars, or conversely, a loss of 500 dollars.

  • Think of it as 10x leverage X 5% = 50%.

Isolated Cross Mode

Isolated Cross Mode (Cross Isolated) is an order mode used in futures trading. Isolated mode only triggers forced liquidation on the margin of the position you ordered and is the most commonly used mode.

Usually, isolated mode is used for futures scalping, practice, and general futures trading.

On the other hand, Cross mode uses the assets in your futures wallet to prevent forced liquidation when it is triggered.

For example, if the forced liquidation price is ten thousand dollars, and you have a long position purchase, assuming you have some USDT assets in your futures wallet, when forced liquidation is triggered, you can lower the forced liquidation price standard to about 8-9 thousand dollars.

Generally, cross mode is used when taking a low leverage futures position for a long term or when averaging down in futures.

This is because mid to high leverage increases the risk of forced liquidation, and you cannot hold a futures position for a long term.

Long Short

Coin futures long short means a long position earns profit when the price rises and incurs a loss when it falls. A short position is the opposite concept, earning profit when the price falls and incurring losses when it rises.

Also, long is entering a position betting on a price rise, and short is entering on a price drop. While long positions are referred to as buying, and short positions as selling, these terms are not commonly used in coins.

Funding Fee

Funding Fee

The funding fee is a system designed to balance the ratio of long and short positions. This is essential to prevent the market from becoming unstable if too many positions are concentrated on one side.

When the funding fee is negative, it means shorts pay a fee to longs, and when it’s positive, longs pay shorts. The larger the margin and leverage, the more funding fee interest needs to be paid.

Post Only, Reduce Only

Post Only, Reduce Only

Post only’ is a function that ensures orders are executed only at a limit price. When you trade with ‘post only’ checked, you’re guaranteed to pay only the limit order fee.

You might wonder, ‘Don’t limit orders already apply limit fees?’ However, limit orders can sometimes be executed at market price. To prevent this, ‘post only’ should be checked.

‘Reduce only’ is a feature that prevents order mistakes. It prevents the placement of more than one identical order and allows trading only in the opposite position.

FOK, IOC, GTC

GTC, FOK, IOC refer to trade execution modes. GTC is the most commonly used. Simply put, after placing a limit order, the unexecuted part remains in the order book.

FOK means if the entire order isn’t executed immediately, it’s automatically canceled. The entire quantity must be executed at once for the order to be valid.

IOC is a mode where any unexecuted part of the order is immediately and automatically canceled after partial execution. Setting GTC, FOK, IOC

TP/SL in Coin Futures Trading

In coin futures trading, TP stands for ‘take profit’ and SL for ‘stop loss’. Essentially, they’re reserved selling functions. You set a coin price, and the trade executes automatically at that price.

TP is literally reserving a sell order at a specific price to take profit. Similarly, SL is setting a sell order at a specific price to cut losses.

Margin in Coin Futures Trading

Margin in coin futures trading simply refers to the amount the user is trading.

Margin Ratio

Margin ratio signifies a numerical representation of the overall risk of liquidation for your position. A margin ratio close to 100% indicates a higher risk of forced liquidation. The margin ratio is assessed based on a combination of factors like margin rate and maintenance margin ratio.

Difference Between Coin Futures Trading and Margin Trading

A commonly confused aspect is the difference between coin margin and futures. To clarify, both derivatives are distinctly different trading platforms. Margin trading typically allows a maximum leverage of up to 10x.

Additionally, it is a platform that allows trading in a market shared with the spot market. While the fees are the same as spot trading fees, it operates on a system where interest must be paid on borrowed coins through leverage.

On the other hand, futures trading takes place in an independent market called the futures market. Here, leverage is adjustable, and the fee structure involves paying more fees as leverage increases, as opposed to repaying borrowed interest.

Difference Between Coin Futures Trading and Margin Trading

Moreover, in margin trading, exchanges typically indicate 3x or 10x next to the coin trading pair, as shown in the image. Usually, isolated mode offers up to 10x, while cross mode provides up to 3x.

Explaining Taker and Maker in Coin Futures Trading

A taker is a market order, while a maker is a limit order, terms also used in spot trading. Simply put, a maker (limit order) is where the user specifies the price and places an order, typically executed as a maker (limit order).

Explaining Taker and Maker in Coin Futures Trading

A taker is a market order, trading at the most recent price based on orders available in the order book. Market orders are executed at market prices, and futures fees are also applied at market rates.

Mark Price, Index Price, Last Price

Mark Price, Index Price, Last Price

Not only in futures trading but also in spot trading, there are three types of indicative prices: Mark Price, Index Price, and Last Price. This applies to both international exchanges like Bitget and Binance.

Mark Price

Mark Price exists due to the volatility of the futures market. A small number of people can easily cause forced liquidation of coins, and if maximum leverage is used with minimal capital, they can easily manipulate the chart in their desired direction.

To prevent such unfair situations, Mark Price is used. Both the profit in coin futures and the standard for forced liquidation are based on Mark Price.

It’s a system that exists for fair futures trading, and each exchange has slightly different criteria. Binance has its own Mark Price, as does Bitget.

Index Price

Index Price is the average price across all exchanges. Typically, it’s calculated based on the average price of top exchanges (like Binance, Coinbase, etc.).

The Index Price of most coin exchanges is almost the same as they reference the same top exchanges.

Last Price

Last Price is the most recently executed price. The price displayed in the middle of the buy and sell orders is the Last Price that was last executed.

Knowing these three terms is important because users can set them manually in Binance futures trading.

Copy Trade

Finally, in coin futures terms, we have Copy Trade. Copy trading means duplicating trades to earn profits in futures or spot trading by taking the same positions as a copy trader.

It’s a derivative where the choice of the trader is more crucial than the skill of the follower.

Conclusion on Coin Futures Terms

In conclusion, knowing these terms should enable you to master most of the futures trading terminology.

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Leisurely Person's Blog
Leisurely Person's Bloghttps://lifeblog.co.kr
Leisurely Person's Blog provides various information on Bitcoin futures trading and cryptocurrencies. The team behind Leisurely Person's blog has a career background including three years of experience using Binance Futures Exchange, two years of experience using Bitget Futures Exchange, and is currently active as a professional influencer for Bitget Exchange

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