10 Futures Market Terms You Should Know!

Do You Speak Crypto: Episode 9

Episode 9: Futures Market Terms

Sometimes a market crash is enough for the crypto space to be full of news headlines pointing to the millions of dollars lost in liquidation. According to the Coinglass Liquidation Data and at the time of writing, more than 78,000 traders were liquidated in the past 24h, with the amount of the total liquidation sitting at almost $210 million!

1. Futures Contract

An agreement between you and another party to sell or buy a specific underlying asset at a predefined price and date in the future. With futures contracts, you don’t need to buy the actual asset and can simply speculate on its future price.

2. Delivery Date

The delivery date, expiration date, or maturity date, is the time that you’ve specified in your futures contract for your positions to get settled. Some commodities require physical delivery of the underlying asset and the place for the delivery is usually specified by the broker.

3. Long Position

You open a long position when you expect the price of your desired asset to increase in the future.

4. Short Position

The futures market allows you to benefit from both market directions. Let’s consider the seller in the previous example.

5. Margin Trading

Margin trading allows you to get more exposure to the markets by borrowing capital from your broker or other traders. In other words, you can open your desired position by just paying a portion of the required amount.

6. Initial Margin

The initial margin is the required amount you have to pay to be able to open a position. This amount depends on the leverage rate you choose to have.

7. Leverage

Leverage refers to the amount of capital you are willing to borrow. For example, you want to open a $50k position. You opt for a 50x leverage which allows you to borrow up to 50 times your initial investment. In other words, you just need to pay $1k to open your $50k position.

8. Maintenance Margin

To keep your leveraged position open, each trading platform asks you to keep a specific amount of funds in your trading account. They use maintenance margin as collateral to cover any potential losses caused by future price fluctuations.

9. Margin Call

When your account value falls below the required amount, you’ll get a margin call from your broker to add additional funds to your account to bring it back up to the level.

10. Liquidation

Normally, the broker will give you some time to meet the margin requirements. If you fail to increase your account value, the broker can sell and liquidate part or all of your assets without your permission to cover any loss.

About DIFX

DIFX is a CEX that uses blockchain technology to incorporate centralized finance. It is an easy-to-use platform for both new and experienced traders, establishments, and investors. As covered by Cointelegraph, BeInCrypto, and many other media outlets, DIFX allows users to nominate anyone from their family, friends, or loved ones and allows them to legitimize their claim upon the primary user’s demise.




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