Key terms you'll run into on this site and in crypto exchanges generally, defined plainly.
- AMM
- An automated market maker prices swaps using a liquidity pool and a formula instead of a traditional order book. It's common on DEXs and can cause heavy slippage in thin pools.
- API Key
- A credential that lets trading software access an exchange account. Restrict its permissions, use IP controls, and never enable withdrawals unless absolutely necessary.
- Ask Price
- The lowest price at which a seller is currently willing to sell an asset. The best ask is one half of the quoted market spread.
- Bid Price
- The highest price a buyer is currently willing to pay. The best bid is the price a market sell order will usually hit first.
- Centralized Exchange (CEX)
- A platform that holds customer assets and matches trades through its own systems. CEXs are convenient, but users rely on the operator for custody and withdrawals.
- Cold Wallet
- A wallet whose private keys are kept offline, usually on dedicated hardware or air-gapped systems. Reputable exchanges keep most customer reserves in cold storage.
- Confirmation
- A block added after a transaction enters the blockchain. More confirmations make reversal less likely, which is why exchanges delay crediting some deposits.
- Cross Margin
- A margin mode where collateral is shared across multiple positions. It uses funds efficiently, but one bad trade can put the entire margin balance at risk.
- Deposit Address
- The blockchain address an exchange assigns for receiving a specific asset. Always check the network too, because sending on the wrong chain can permanently lose funds.
- Depth Chart
- A visual display of cumulative buy and sell orders at different prices. It can show nearby liquidity, but large visible orders may disappear or be spoofed.
- Funding Rate
- A periodic payment exchanged between long and short perpetual futures traders. Positive funding means longs pay shorts, and sustained high rates can make holding a position expensive.
- Hot Wallet
- A wallet connected to the internet for processing deposits and withdrawals. It is practical for daily operations but carries more attack risk than cold storage.
- KYC
- Know Your Customer verification, usually requiring identity documents and sometimes proof of address. Many exchanges require it before allowing fiat transfers or larger withdrawals.
- Limit Order
- An order to buy or sell at a chosen price or better. It gives you price control, though it may never fill if the market moves away.
- Liquidity
- How easily an asset can be bought or sold without materially moving its price. Deep liquidity usually means tighter spreads and more reliable order execution.
- Maker Fee
- The trading fee charged when your order adds liquidity to the order book, usually through an unfilled limit order. Maker fees are often lower than taker fees.
- Mark Price
- A reference price used by futures exchanges to calculate unrealized profit, loss, and liquidations. It is designed to resist short-lived price manipulation on one venue.
- Market Order
- An order that executes immediately against available orders at the best current prices. It is fast, but the final fill can be worse than expected in a thin market.
- Order Book
- A live list of outstanding buy and sell orders, arranged by price. It shows quoted liquidity, not guaranteed liquidity, since orders can be cancelled instantly.
- Perpetual Futures
- Crypto derivatives contracts with no expiry date. Traders use leverage to go long or short, while funding payments help keep the contract price near the spot price.
- Proof of Reserves
- An exchange's evidence that it controls certain on-chain assets, often checked through a Merkle tree. It is useful, but it does not automatically prove all liabilities are covered.
- Slippage
- The difference between the price expected for a trade and the price actually received. Large orders, volatile markets, and shallow books all make slippage worse.
- Spread
- The gap between the best available bid and ask price. A narrow spread usually signals healthier trading conditions and lower immediate execution costs.
- Stop-Limit Order
- An order that places a limit order after a stop price is reached. It offers price control, but the limit order may not fill during a sharp move.
- Taker Fee
- The trading fee charged when an order immediately matches existing liquidity in the order book. Market orders nearly always pay the taker rate.
- Trading Pair
- Two assets quoted against each other, such as BTC/USDT. The first asset is the base currency, while the second is used to price and settle the trade.
- Withdrawal Whitelist
- A security setting that limits withdrawals to pre-approved wallet addresses. It adds friction, which is exactly why it is one of the better account protections available.