Glossary
Key terms you'll run into on this site and in crypto exchanges generally, defined plainly.
- AMM
- Automated market maker. A trading system that prices swaps using pooled assets and a formula rather than matching buyers with sellers in an order book.
- API Key
- A credential that lets trading software connect to an exchange account. Disable withdrawal permissions unless you genuinely need them.
- Ask Price
- The lowest price a seller is currently willing to accept. The best ask is the first sell order available in the order book.
- Auto Deleveraging
- A derivatives exchange mechanism that cuts profitable traders' positions when the insurance fund cannot cover bankrupt liquidations. It is an unpopular last resort.
- Cold Wallet
- A crypto wallet kept offline, usually for exchange reserves. Cold storage is safer from remote attacks, though it does not remove custody risk.
- Cross Margin
- A margin setting where your available account balance supports all open positions. It can prevent a quick liquidation, but losses can spread across the account.
- Deposit Address
- The blockchain address an exchange assigns for receiving a specific asset. Sending the wrong network or token can make recovery difficult or impossible.
- Depth Chart
- A visual view of buy and sell orders at different prices. It can show thin liquidity, though large displayed orders may be cancelled quickly.
- Funding Rate
- A periodic payment between long and short perpetual futures traders. Positive funding means longs pay shorts, and high rates can make holding a position expensive.
- Hot Wallet
- A wallet connected to the internet and used for routine deposits and withdrawals. It is convenient, but it carries more attack exposure than cold storage.
- Insurance Fund
- A reserve used by derivatives exchanges to cover losses from liquidated accounts. A healthy fund reduces the chance of auto deleveraging during volatility.
- Isolated Margin
- A margin mode that limits collateral to one position. If that trade fails, the rest of your account is generally protected from its liquidation.
- KYC
- Know Your Customer verification. Exchanges use identity checks to meet compliance rules and to set deposit, withdrawal, or trading limits.
- Limit Order
- An order to buy or sell at a chosen price or better. It gives price control, but it may never fill if the market moves away.
- Liquidation
- The forced closing of a leveraged position after its collateral no longer meets the exchange's maintenance margin requirement. Fees and slippage can worsen the loss.
- Maker Fee
- The fee charged when your order adds liquidity to the order book, usually through an unfilled limit order. Maker fees are often lower than taker fees.
- Market Maker
- A trader or firm that continuously posts buy and sell orders. Good market makers tighten spreads, though their liquidity can disappear during a sharp move.
- Market Order
- An instruction to buy or sell immediately at the best available prices. It fills fast, but a thin book can produce nasty slippage.
- Order Book
- A live list of open buy and sell orders for a trading pair. It shows available liquidity and the gap between the best bid and ask.
- Proof of Reserves
- A public method for showing exchange-held assets, often using wallet addresses and Merkle tree data. It is useful, but it does not prove all liabilities are covered.
- Reduce-Only Order
- An order setting that can only decrease or close an existing derivatives position. It prevents an exit order from accidentally opening a new trade.
- Slippage
- The difference between the price you expected and the price your trade actually receives. It gets worse with large orders, volatility, and weak liquidity.
- Spot Market
- The market for buying or selling the actual asset for settlement now, rather than trading a contract based on its price.
- Stop-Limit Order
- An order that places a limit order after a trigger price is reached. It offers price control, but the limit order may not fill in a fast crash.
- Taker Fee
- The fee charged when an order immediately matches existing liquidity, such as a market order. Taker fees are usually higher than maker fees.
- Trading Pair
- Two assets quoted against each other, such as BTC/USDT. The first asset is traded, while the second is the currency used to price it.
- Travel Rule
- A compliance rule requiring crypto service providers to collect and share sender and recipient information for certain transfers. It can delay withdrawals to unverified wallets.
- Withdrawal Whitelist
- A security setting that restricts withdrawals to preapproved wallet addresses. It adds friction, which is exactly why it is worth enabling.