A $1,000 margin deposit can support a $5,000 position. The first number is collateral; the second is notional exposure. Much of trading vocabulary exists to keep distinctions like this visible.
These definitions describe common usage. A contract specification controls when a venue uses a term differently.
Instruments
- Spot
- A transaction in the asset itself, rather than a derivative referencing its price.
- Perpetual future
- A derivative with no scheduled expiry, typically using recurring funding payments.
- Dated future
- A contract with a specified expiration and settlement or delivery procedure.
- Long
- Positive exposure to the referenced price; for a simple linear position, price rises generate gains before costs.
- Short
- Negative exposure to the referenced price; for a simple linear position, price declines generate gains before costs.
- Notional
- The value of the exposure. It is distinct from the collateral supporting it.
- Contract multiplier
- The quantity or monetary value represented by one contract unit.
- Settlement asset
- The asset in which a contract’s obligations are paid.
- Synthetic exposure
- Economic exposure created through contracts rather than ownership of the underlying.
- Basis
- A price difference between related instruments, with the instruments and quotation convention specified.
Collateral and risk
- Margin
- Collateral supporting a position under an account’s rules.
- Initial margin
- The margin requirement for opening exposure.
- Maintenance margin
- The minimum equity requirement for maintaining exposure.
- Leverage
- Exposure divided by the equity supporting it.
- Cross margin
- A system in which positions share collateral within a defined margin pool.
- Isolated margin
- A system allocating collateral to a particular position under the venue’s rules.
- Liquidation
- Forced position reduction when the relevant margin requirements are breached.
- ADL
- Auto-deleveraging: forced reduction of selected opposing positions under specified conditions.
- Drawdown
- A decline in equity from an earlier peak.
- Correlation
- A measure of how variables move together. The estimate depends on the data and period.
The exact collateral pool matters. Hyperliquid’s margin reference defines its cross and isolated arrangements; its ADL rules describe the final solvency mechanism separately from ordinary liquidation.
Prices and trading activity
- Bid
- A proposed price and quantity for a purchase.
- Ask
- A proposed price and quantity for a sale.
- Spread
- The difference between the best ask and best bid.
- Basis point
- One hundredth of a percentage point: 1 bp = 0.01% = 0.0001. On $10,000, 1 bp is $1.
- Percentage point
- An absolute difference between percentages. A rate rising from 4% to 5% rises one percentage point, or 25% relative to the original rate.
- Depth
- The quantity available at different order-book prices.
- Liquidity
- The ability to transact a given size without a large cost or price impact.
- Slippage
- The difference between an execution price and an explicitly chosen reference.
- Mark price
- A venue-defined valuation price used for specified account and risk calculations.
- Oracle
- A mechanism supplying reference information to a protocol.
- Volume
- The quantity traded during a defined interval.
- Open interest
- The quantity of outstanding derivative contracts; trading volume measures activity instead.
Orders and costs
- Market order
- An instruction seeking immediate execution against available liquidity.
- Limit order
- An instruction specifying the worst acceptable price; execution is not assured. A marketable limit can execute immediately and take liquidity.
- Stop trigger
- A condition that activates an order. The trigger price is not a promised fill.
- Stop-limit
- A stop that activates a limit order, which can remain unfilled.
- Take-profit
- An exit instruction associated with a favorable price move.
- Reduce-only
- An order constraint intended to reduce existing exposure without increasing it.
- Post-only
- An instruction permitted to execute only as a resting order. It may be rejected or canceled if it would immediately take liquidity.
- Maker
- The participant whose resting order supplies liquidity when a trade occurs.
- Taker
- The participant whose order executes against existing liquidity.
- Funding
- Periodic payments associated with perp positions under the contract’s funding formula.
Performance and onchain tools
- Realized P&L
- Profit or loss booked under the account’s accounting rules; closing a position commonly realizes its price P&L.
- Unrealized P&L
- Profit or loss on open exposure at a specified valuation price.
- Expectancy
- The probability-weighted average result of possible outcomes, including costs.
- R multiple
- A trade’s result divided by its original planned loss budget.
- Volatility
- A measure of return variation over a specified interval; implied volatility is inferred from option prices.
- Stablecoin
- A token designed to track a reference value; issuer and mechanism risks can remain.
- Bridge
- Infrastructure connecting value or messages across networks.
- Wallet approval
- A permission whose powers are defined by the signed action.
- Vault
- A pooled asset or strategy arrangement with specified operating and withdrawal rules.
- Builder fee
- An additional fee associated with an approved application routing a trade.
The Perps 101 sequence works through the main terms with numerical examples. Venue-specific order behavior is described in the official order reference.
Three numbers that describe different risks
Notional measures exposure, margin is the collateral supporting it, and a planned loss is what you expect to lose at a chosen exit. A $1,000 linear position supported by $200 can have a $30 planned loss if the exit is 3% away. Neither the $200 deposit nor the $30 plan changes the position’s $10 gain or loss per 1% price move. The planned exit can also slip.
Likewise, a high win rate does not establish positive expectancy. Winning $10 on 80% of trades and losing $50 on 20% produces an average $2 loss per trade before costs: 0.8 × $10 − 0.2 × $50. Vocabulary becomes useful when it prevents these different measurements from being substituted for one another.
Use the terms together
Imagine a 10-unit long entered at $100. Its initial notional is $1,000. Posting $200 of margin gives 5× initial leverage. If the mark reaches $103, the gross unrealized P&L is $30 under this linear contract’s assumptions.
You send a reduce-only sell limit at $104. If no bid is available at $104 or better, a good-till-canceled order can rest in the book. Check fills to distinguish a completed sale from the quantity still waiting; submission alone does not realize a profit. If all ten units eventually sell at $104, the gross realized P&L is $40. Fees and net funding then determine the net result.
Reading the terms in that order explains the position’s life: exposure, financial support, valuation, instruction, execution, and final cash flows. When a platform uses an unfamiliar label, locate it within that sequence and check the venue’s definition. You can learn the vocabulary as you use it rather than trying to memorize every term before beginning.