Glossary
Key terms you'll run into on this site and in crypto exchanges generally, defined plainly.
- ADL
- Auto deleveraging. A futures exchange may cut profitable positions to cover bankrupt traders when its insurance fund cannot absorb the loss.
- AMM
- Automated market maker. A smart contract prices trades against a liquidity pool instead of matching buyers and sellers in an order book.
- API Key
- A credential that lets software access an exchange account. Restrict permissions and IP addresses, because a leaked trading key can be expensive.
- Ask Price
- The lowest price a seller is currently willing to accept. The best ask is the price a market buy order usually hits first.
- Base Currency
- The first asset named in a trading pair. In BTC/USDT, BTC is the base currency and the trade size is measured in BTC.
- Bid Price
- The highest price a buyer is currently offering. The best bid is where a market sell order will usually execute first.
- Centralized Exchange (CEX)
- A platform that matches trades and usually holds customer assets in custodial wallets. It is convenient, but custody risk is real.
- Cold Wallet
- A crypto wallet kept offline from routine internet access. Exchanges use cold storage to reduce the chance of a remote wallet breach.
- Cross Margin
- A margin mode that uses available account collateral to support all open positions. It can prevent one liquidation, but puts more funds at risk.
- Deposit Address
- The blockchain address an exchange assigns for incoming funds. Always confirm the network too, since the right address on the wrong chain can fail.
- Depth Chart
- A visual chart of cumulative buy and sell orders at different prices. It helps reveal thin liquidity and large resting orders.
- Funding Rate
- A periodic payment between long and short perpetual futures traders. Positive funding means longs pay shorts, often a sign of crowded bullish positions.
- Hot Wallet
- A wallet connected to the internet for fast deposits and withdrawals. It is practical for exchange operations, but carries greater attack exposure.
- Isolated Margin
- A margin mode that assigns collateral to one position only. Losses are contained to that position unless you add more margin manually.
- KYC
- Know Your Customer checks that verify a user's identity, usually with ID documents and a selfie. Many exchanges require it before withdrawals or higher limits.
- Liquidation Price
- The price at which an exchange closes a leveraged position because its collateral no longer meets maintenance margin requirements.
- Maker Fee
- The fee charged for an order that adds liquidity by resting on the book. Maker fees are usually lower than taker fees.
- Market Order
- An order to buy or sell immediately at the best available prices. It prioritizes execution, not price, so it can slip badly in a thin book.
- Order Book
- A live list of open buy and sell orders organized by price. It shows available liquidity, though large displayed orders can disappear quickly.
- Proof of Reserves
- Evidence that an exchange controls certain wallet balances, often using a Merkle tree. It is useful, but it does not prove the exchange has no hidden liabilities.
- Slippage
- The difference between the expected trade price and the actual execution price. Large orders and low liquidity make slippage worse.
- Spread
- The gap between the best bid and best ask. A tight spread usually means cheaper trading, while a wide one is an immediate cost.
- Stop Limit Order
- An order that places a limit order after a stop price is reached. It offers price control, but may not fill during a fast move.
- Taker Fee
- The fee charged for an order that immediately matches existing liquidity. Market orders are typically taker orders.
- Trading Pair
- Two assets quoted against each other, such as ETH/USDT. The first asset is traded and the second is used to price it.
- Travel Rule
- A rule requiring crypto businesses to share sender and recipient details for certain transfers. The exact thresholds and implementation vary by jurisdiction.
- Withdrawal Whitelist
- A security feature that limits withdrawals to preapproved wallet addresses. It adds friction, which is exactly why it is worth enabling.