Every word behind an autopsy, defined in one or two sentences.
Position Sizing
Position sizing — a capital-management rule defining what share of funds may be risked in a single trade. Position-sizing discipline means capital with a purpose (e.g. funds set aside for obligations) should never enter trades with unlimited risk.
Earmarked Capital
Earmarked capital — funds set aside in advance for a specific obligation (tax, rent, debt). Such capital has a deadline and a purpose, so it must not be exposed to trades that can lose it.
Perpetual Futures
A derivative contract that lets you bet on an asset's price movement without owning the asset itself. Unlike classic futures, perpetuals have no expiration date — you can hold a position indefinitely, as long as you have margin to back it.
Leverage
Borrowed exposure that multiplies both potential profit and potential loss. With 10x leverage, $1,000 of your own capital controls a $10,000 position.
Margin
Collateral you post to open and maintain a leveraged position. Two types: initial margin (what's required to open the trade) and maintenance margin (the minimum balance you must keep to avoid liquidation).
Notional Value
The full dollar size of your position, including borrowed funds. Notional ≠ your capital.
Funding Rate
A periodic payment exchanged between longs and shorts, settled every 8 hours on most exchanges. When longs dominate, longs pay shorts. When shorts dominate, shorts pay longs.
Liquidation
Automatic forced closure of a position when your margin drops below the maintenance threshold. The exchange's liquidation engine takes over and sells (or buys to cover) at market price.
Cross vs Isolated Margin
Two different ways to allocate collateral. Cross margin uses your entire account balance as collateral for any position. Isolated margin restricts collateral to a specific position.
Position Size
The full notional value of your trade. Ideally calculated as a percentage of capital — not as a fixed dollar amount.
Market Order
An instruction to buy or sell immediately at whatever price the order book offers. A market order guarantees execution but not price.
Limit Order
An instruction to buy or sell only at a specific price (or better). A limit order guarantees price but not execution.
Stop-Loss
A preset order that automatically closes a position if the price reaches a specified level. The goal is to cap losses at a predetermined amount.
Take-Profit
A preset order that automatically closes a position when the price reaches a profit target. The opposite of a stop-loss.
Reduce-Only
A modifier that prevents an order from opening a new position — it can only reduce or close an existing one.
Open Interest (OI)
The total number of open derivative contracts that haven't been closed yet.
Basis
The difference between the perpetual contract price and the spot price.
Oracle Price
A reference price feed that exchanges use to calculate liquidation triggers. Usually aggregated from multiple spot exchanges.
Bid-Ask Spread
The gap between the highest buyer's price (bid) and the lowest seller's price (ask).
Order Book
The list of all open buy and sell orders at different price levels. The order book is literally a real-time supply-and-demand curve of the market.
Liquidation Cascade
A chain reaction where one liquidation triggers a price move, which liquidates more positions, which triggers more movement, which liquidates even more. A cascade can destroy billions of dollars in positions within minutes.
Anchoring Bias
The tendency to over-rely on the first piece of information received when making decisions. In trading, it usually shows up as attachment to a previous price level.
Confirmation Bias
The tendency to seek out, notice, and remember information that confirms your current view — while ignoring or downplaying data that contradicts it.
Loss Aversion
A psychological effect where the pain of a loss feels roughly twice as strong as the pleasure of a gain of the same size. Proven in research by Kahneman and Tversky.
Gambler's Fallacy
The mistaken belief that after a series of similar outcomes, the probability of the opposite outcome increases. For independent events, it doesn't.
Sunk Cost Fallacy
The tendency to keep investing in a losing position because of resources already spent — instead of evaluating the current situation rationally.
Recency Bias
The tendency to give too much weight to recent events when assessing probabilities and making decisions.
Drawdown
The drop in capital from peak to trough, measured in percent. Maximum drawdown is the deepest decline over a given period.
Risk-Reward Ratio (R:R)
The ratio of potential loss to potential profit on a trade. R:R of 1:3 means you're risking $1 for a potential $3 of profit.
Win Rate
The percentage of trades that close in profit. On its own — almost a useless metric without R:R context.
Maximum Adverse Excursion
The maximum price move against you during the lifetime of a trade — even if the trade ultimately closed at a profit.
Capital Preservation
A strategic principle: the first goal of trading is not to lose money. Profit is secondary. This is the fundamental mindset of professional traders and hedge funds.
Tokenomics
The economic design of a crypto token: total supply, emission schedule, distribution between team / investors / community, vesting periods, burn mechanisms, and the utility that gives the token a reason to exist.
Vesting Schedule
The timeline under which locked tokens (held by the team, advisors, or early investors) become available to sell. Usually structured with a cliff (no unlocks for a period) followed by linear or stepped releases.
Vesting Cliff
The initial period of a vesting schedule during which no tokens can be sold or transferred. Typical cliffs run 6–12 months. At the end of the cliff, the first unlock happens (often 25% of the team or investor allocation), after which tokens continue to release linearly or in steps.
Exchange Tiers
An informal industry ranking of exchanges by trading volume, liquidity depth, regulatory standing, and operational track record. Tier-1: Binance, Coinbase, OKX, Kraken, Bybit. Tier-2: mid-volume regulated venues. Tier-3: smaller or less-regulated platforms.
White Label Exchange
An exchange that operates on infrastructure (matching engine, KYC system, custody, wallet stack) provided by another platform under a B2B agreement, while presenting its own brand to users.
Listing Fee
The cost paid by a project to be listed on an exchange. Can take the form of cash, a portion of token supply, mandatory market-making commitments, or a combination. Disclosure practices vary widely: Binance publicly donates listing fees to charity; Coinbase states it accepts no listing fees; smaller venues are less transparent.
Market Maker
A firm or trading desk that continuously quotes bid and ask prices on a token, profiting from the spread and from incentives provided by the exchange or the project. Major MM firms in crypto: Wintermute, GSR, Amber, Cumberland, DWF Labs.
Launchpool
A program offered by an exchange where users stake one asset (typically the exchange's native token — BNB, MX, BGB, etc.) to earn allocations of a new token during a defined farming period.
Pre-Market Trading
Trading a token before its official spot listing, typically against IOUs or futures contracts rather than the underlying asset. MEXC, Binance, and several other platforms offer pre-market venues for tokens that are confirmed but not yet live.
Wash Trading
Trading activity where the same party (or coordinated parties) act as both buyer and seller, generating volume without transferring real economic risk. Often used to create the appearance of liquidity, qualify for listing, or farm token rewards tied to volume.
Exit Liquidity
Capital that arrives at a token after early holders are ready to sell, providing them with the volume needed to exit at favorable prices. Retail demand around a CEX listing frequently serves this function for venture investors and pre-sale buyers.
Dead Coin
A cryptocurrency that has effectively ceased to exist. Industry trackers define it as a token with trading volume under $1,000 over a three-month rolling window, plus inactive social channels and an unreachable team.
Rug Pull
Hard rug: developers explicitly drain liquidity from a pool, sell their allocation in seconds, and disappear with the funds (SQUID is the canonical example). Soft rug: the team gradually disengages without an explicit theft event — abandoning communication, transferring contract ownership, missing development milestones (Friend.tech in 2024 is a recent textbook case).
Ponzi Scheme
A financial scheme where returns to early participants are paid from the funds of new depositors, not from real economic activity. Named after Charles Ponzi, the architect of the famous 1920 US scam. In crypto, the scheme often disguises itself as "20% APY staking," "yield farming," or "trading bot with guaranteed returns."
Mark Price
The fair price the exchange uses to calculate unrealized P&L and decide whether to liquidate a position. Mark Price is NOT equal to last trade price — it is calculated from a composite spot index across multiple exchanges, with funding rate adjustment. This design prevents single-venue manipulation from triggering false liquidations.
Maintenance Margin
The minimum equity required to keep a position open. If equity drops below Maintenance Margin, the exchange force-closes the position (liquidation). Maintenance Margin Ratio (MMR) is typically 0.4–0.5% of notional for BTC, up to 5–10% for high-leverage altcoins.
Headline Risk
The risk of sharp price movement from a public news event — a political tweet, a regulatory ruling, an emergency central bank statement, sanctions or tariff announcements. On crypto perpetuals, headline risk is asymmetric: one post can produce a 10–15% move in hours, especially at high Open Interest.
Risk-Off
A market state where investors exit risk assets en masse (equities, crypto, high-yield bonds) and rotate into defensive assets (USD, gold, US Treasuries). Triggers are typically geopolitical, inflationary, banking crises, or war. Opposite of Risk-On.
Black Swan
An extremely rare and unexpected event with enormous market impact, post-rationalized as 'obvious' after the fact. Coined by Nassim Taleb. Key characteristic: standard deviation models don't cover such events, so they look like 'noise' until they happen.
Bull Trap
A false signal of upward continuation, followed by a sharp drop. Often appears on a breakout of a local high or ATH without volume confirmation and broad participation. Traders enter LONG on the breakout, price falls back below the breakout level and keeps dropping — that's the trap.
Insurance Fund
An exchange reserve that covers losses when a liquidation engine cannot close a position above its bankruptcy price. Funded by liquidation penalties (part of the closing fee on forced closes). When the fund is depleted, exchanges activate ADL (Auto-Deleveraging).
ADL (Auto-Deleveraging)
Forced closure of profitable traders' positions by the exchange when the Insurance Fund cannot cover losses from the opposite side's liquidations. The exchange closes the most leveraged profitable traders first — those with the highest PnL-to-margin ratio.
Pricing Oracle
The price feed an exchange or DeFi protocol uses for calculations: collateral valuation, liquidation triggers, position settlement. An oracle can be external (Chainlink, Pyth — aggregating multiple exchanges) or internal (the exchange uses its own orderbook). Internal oracles are faster but vulnerable to single-venue manipulation.
Unified Account
An exchange account type where all assets (spot positions, futures, earn products, tokens, stablecoins) count as a single collateral pool. Margin is calculated against the aggregated value. Convenient for traders — you can use ETH or USDe as collateral for a BTC position. Dangerous because the depeg of one collateral asset re-prices margin across all open positions simultaneously.
Synthetic Stablecoin
A dollar-pegged token backed not by bank reserves (like USDT, USDC) but by an algorithmic strategy — typically delta-neutral hedging with futures. Yield is generated from funding rates and staking. Examples: USDe (Ethena), USDX. Under stress, the peg can break faster than collateralized stablecoins.
Leverage Loop
A recursive borrowing structure: use asset A as collateral to borrow asset B, convert B back into A, use as collateral again. Each cycle adds leverage. On paper looks like 'yield arbitrage'; in practice it's hidden leverage up to 10x on the initial deposit.
Amplification Ratio
The ratio between the size of a trigger event and the size of the resulting destruction. In oracle attacks = direct manipulation size / total liquidation volume. A high ratio means the system is structurally fragile: a small targeted action produces disproportionate impact.
Batch Fill Ranged Orders
A series of limit buy or sell orders placed simultaneously at close price levels (or at a single level). All orders execute almost instantaneously when the price range is hit. Technically a legitimate execution method — but psychologically it signals that the trader wants 'to be in the position at any cost' and has no specific entry point.
Inverse Perpetual
A perpetual futures contract where margin is held in the base asset itself (e.g., BTC), and contract notional is denominated in USD. Each contract = $1 USD notional. P&L is paid in the base asset. Opposite of linear perpetual (where margin is in stablecoin).
Coin-Margined
Margining type where collateral is held in the crypto asset itself (e.g., BTC, ETH), not in a stablecoin. Technically synonymous with inverse perpetual. The alternative is USDT-margined (linear perpetual).
Linear Perpetual
A perpetual futures contract where margin is in a stablecoin (USDT), and P&L is also denominated in the stablecoin. The standard type for most crypto perps on major exchanges (Binance, Bybit, OKX). Opposite of inverse perpetual.
Identity-Based Trading
A state where the position stops being an answer to 'what is the chart doing?' and becomes an answer to 'who am I in the market?' The trader holds the position not for a setup, but because closing would mean admitting being wrong. Opposite of setup-based trading.
ETF Outflow
Net outflow of capital from a spot cryptocurrency ETF (e.g., IBIT, FBTC). When investors sell ETF shares, authorized participants must sell a corresponding amount of BTC on the market. This creates mechanical sell pressure independent of crypto market sentiment.
Hope as Thesis
A cognitive error where hope for price to return to a certain level masquerades as a trading thesis. The way to tell them apart is by exit triggers: a real thesis has falsification criteria ('I will close if X'). Hope does not.
Affiliate Marketing
A business model where an influencer or content creator receives a percentage of trading volume from their referrals on an exchange. On most major exchanges this is 10-40% of trading fees generated by referred users. The more subscribers trade, the more the influencer earns.
Quantitative Easing (QE)
A central-bank tool: it creates new money and uses it to buy assets — usually government bonds, sometimes mortgage securities. The goal is to flood the financial system with liquidity, push yields down, and nudge investors into riskier assets. In effect, it is the money printer switched on in a crisis, when there is no more room to cut rates.
FUD
Short for Fear, Uncertainty, Doubt. It is the wave of negativity around an asset: headlines like scam, it is over, it is dead, panic across social feeds and chats. FUD can be sincere (people are genuinely scared) or deliberately seeded — to push the price down and buy back cheaper.
ICO
Initial Coin Offering. A way for a crypto project to raise money: the team issues a new token and sells it to investors before any product exists, promising future value. The ICO boom peaked in 2017, when hundreds of projects raised millions with virtually no product, regulation, or accountability.
Mining
The process that creates new bitcoins and confirms transactions. Specialized computers solve computational puzzles and are rewarded in BTC. Mining secures the network but demands enormous computing power and electricity, which makes it highly sensitive to regulation and energy prices.
The Fed
The Federal Reserve — the central bank of the United States. It sets interest rates and controls the money supply. When the Fed cuts rates and 'prints' money, risk assets (including Bitcoin) usually rise; when it raises and holds high, it presses them down. For crypto, the Fed is one of the most powerful external forces.
ETF
Exchange-Traded Fund. A spot Bitcoin ETF holds real Bitcoin, and investors buy its shares on a regular stock exchange, with no crypto wallets involved. The launch of US spot BTC ETFs in January 2024 opened crypto to institutional money — and made Bitcoin dependent on those flows.
WTI (crude oil)
West Texas Intermediate — the benchmark grade of US crude and the main reference for oil prices in the United States. The WTI price reflects the state of the global economy and geopolitical tension: a sharp rise usually signals a supply shock (conflicts, sanctions), while a collapse signals falling demand.
ISIS
A terrorist organization whose military activity in the Middle East in the mid-2010s became a source of geopolitical shocks. What matters for markets is not the group itself but its price impact: the seizure of oil regions pushed crude prices up and, through that, pressured risk assets.
