Trading Terms Glossary
Essential terminology for Web3 perpetual futures trading on Riverr.
Core Trading Concepts
Leverage
The ability to control a larger position with a smaller amount of capital.
Example: With 10x leverage, you can control a $10,000 position with only $1,000 of your own funds.
- 1x Leverage: No amplification, 1:1 ratio
- 5x Leverage: 5x amplification, higher risk/reward
- 20x Leverage: 20x amplification, very high risk
Higher leverage means both profits AND losses are amplified. Use with caution.
Margin
The amount of your own funds required to open a leveraged position.
Types of Margin:
- Initial Margin: Amount needed to open position
- Maintenance Margin: Minimum amount needed to keep position open
- Available Margin: Funds available for new positions
Formula: Required Margin = Position Size ÷ Leverage
Collateral
The assets you deposit to back your trading positions. Acts as security for borrowed funds.
Accepted Collateral on Riverr:
- ICP tokens
- ckBTC
- Other supported crypto assets
Position
A trade you have opened that hasn't been closed yet.
Types:
- Long Position: Betting price will go UP
- Short Position: Betting price will go DOWN
Position States:
- Open: Currently active
- Closed: Manually closed by trader
- Liquidated: Automatically closed due to insufficient margin
Profit & Loss (PnL)
Unrealized PnL
Profit or loss on open positions that haven't been closed yet.
- Green/Positive: You're currently in profit
- Red/Negative: You're currently at a loss
Realized PnL
Actual profit or loss from positions you've already closed.
Mark Price
The fair value price used for liquidation calculations. Usually close to, but may differ slightly from, the market price to prevent manipulation.
Entry Price
The average price at which you opened your position.
Liquidation
Liquidation
Automatic closing of your position when you don't have enough margin to maintain it.
When it happens:
- Your margin falls below maintenance requirements
- Usually due to adverse price movement
- Results in loss of your collateral
Liquidation Price
The price level at which your position will be automatically liquidated.
Calculation factors:
- Entry price
- Leverage used
- Position size
- Current margin balance
Always monitor your liquidation price. Add margin or close positions before reaching it.
Margin Ratio
Percentage showing how close you are to liquidation.
- Above 100%: Safe zone
- 50-100%: Warning zone
- Below 50%: Danger zone (close to liquidation)
Order Types
Market Order
Order that executes immediately at the current market price.
Pros: Guaranteed execution Cons: Price slippage on large orders
Limit Order
Order that only executes at a specific price or better.
Pros: Price control, no slippage Cons: May not execute if price doesn't reach your level
Stop-Loss Order
Automatically closes your position at a predetermined loss level.
Example: You buy BTC at $50,000 and set stop-loss at $45,000. If BTC drops to $45,000, your position automatically closes to limit losses.
Take-Profit Order
Automatically closes your position at a predetermined profit level.
Example: You buy BTC at $50,000 and set take-profit at $55,000. If BTC rises to $55,000, your position automatically closes to secure profits.
Funding & Fees
Funding Rate
Regular payment between long and short traders to keep perpetual futures prices close to spot prices.
How it works:
- Positive rate: Longs pay shorts
- Negative rate: Shorts pay longs
- Payment frequency: Usually every 8 hours
Funding Payment
The actual amount paid or received based on funding rate.
Funding Payment = Position Size × Funding Rate
Trading Fees
Fees charged for opening and closing positions.
Typical structure:
- Market orders: ~0.1% (taker fee)
- Limit orders: ~0.05% (maker fee)
Slippage
The difference between expected price and actual execution price, especially with large market orders.
Advanced Concepts
Open Interest
Total value of all open positions in a market. Higher open interest usually means more liquid market.
Volume
Total amount of trading activity in a given period. Higher volume usually means tighter spreads and better execution.
Spread
Difference between highest bid price and lowest ask price. Tighter spreads mean more efficient markets.
Basis
Difference between perpetual futures price and underlying spot price. Usually small due to funding mechanism.
Index Price
Reference price from major spot exchanges used to calculate funding rates and mark prices.
Risk Metrics
Value at Risk (VaR)
Estimate of potential loss over a specific time period with given confidence level.
Maximum Drawdown
Largest peak-to-trough loss in your trading account.
Risk-Reward Ratio
Comparison of potential profit to potential loss on a trade.
Example: Risking $100 to potentially make $200 = 1:2 risk-reward ratio
Win Rate
Percentage of profitable trades out of total trades.
Position Management Terms
Adding to Position
Increasing the size of an existing position, also called "scaling in."
Reducing Position
Decreasing the size of an existing position by partially closing it.
Hedging
Opening opposite positions to reduce risk exposure.
Portfolio Margin
Margin system that considers correlations between different positions for more efficient capital usage.
Common Trading Abbreviations
- PnL: Profit and Loss
- TP: Take Profit
- SL: Stop Loss
- DCA: Dollar Cost Averaging
- FOMO: Fear of Missing Out
- FUD: Fear, Uncertainty, and Doubt
- HODLing: Holding positions long-term
- Rekt: Heavily liquidated/lost money
Market Conditions
Bull Market
Extended period of rising prices and optimism.
Bear Market
Extended period of falling prices and pessimism.
Sideways/Crab Market
Period of relatively stable prices with no clear trend.
Volatility
Measure of price movement intensity. High volatility = larger price swings.
Understanding these terms is crucial for successful trading. Bookmark this page and refer back when needed!
Quick Reference
| Term | Definition |
|---|---|
| Long | Betting price goes up |
| Short | Betting price goes down |
| 2x Leverage | Control $2000 with $1000 |
| Liquidation | Forced position closure |
| Funding | Payment between longs/shorts |
| Slippage | Price difference on execution |
| Stop-Loss | Automatic loss-limiting order |