Perp Trading Glossary - Perp DEX Terms & Definitions Explained
Complete reference of perp trading terminology for perpetual DEXs. 36 terms including funding rate, open interest, liquidation, leverage - explained in plain language for traders on decentralized perpetual exchanges.
Basics
Funding Rate
A periodic payment exchanged between long and short position holders on perp DEXs to keep perpetual prices aligned with spot prices. Positive funding means longs pay shorts; negative funding means shorts pay longs. Typically settled every 8 hours on most perpetual exchanges.
Onchain Perps
Perpetual futures contracts that settle on blockchain networks. Onchain perps provide transparency and self-custody on decentralized perpetual exchanges. All trades and positions are verifiable on the blockchain.
Perp DEX
A decentralized perpetual exchange where users trade perpetual futures contracts without a centralized intermediary. Examples include Hyperliquid, Lighter, Paradex. Users maintain custody of funds on perp DEXs unlike centralized exchanges.
Perpetual Futures (Perps)
Derivative contracts on perp DEXs that track an underlying asset's price with no expiration date. Traders can hold positions indefinitely on perpetual exchanges as long as they maintain sufficient margin. The perp price is kept aligned with spot through funding rate payments.
Metrics
Open Interest (OI)
The total value of all outstanding perpetual contracts on a perp DEX that have not been settled. Rising perps open interest indicates new capital entering; falling OI suggests positions are closing. A key metric tracked on platforms like PerpScope for market analysis.
Realized PnL
Profit or loss from closed positions on a perp DEX. Locked in and added to your account balance on the perpetual exchange. Includes trading fees and funding payments.
Unrealized PnL
Profit or loss on open positions on a perp DEX that hasn't been locked in yet. Changes as price moves on the perpetual exchange. Only becomes 'realized' when you close the position.
Trading
Cross Margin
A margin mode on perp DEXs where your entire account balance serves as collateral for all open positions. Provides more buffer against liquidation but risks losing your full balance on perpetual exchanges if positions go deeply negative.
Initial Margin
The minimum collateral required to open a leveraged position on a perpetual DEX. Determined by the leverage selected - higher leverage requires less initial margin but brings higher liquidation risk on perp trading platforms.
Isolated Margin
A margin mode on perp DEXs where each position has its own dedicated margin. If liquidated, only the allocated margin is lost - your other funds are protected. Recommended for limiting risk on individual perp trades.
Leverage
A multiplier on perp DEXs that allows traders to control larger positions with less capital. 10x leverage means $1,000 margin controls a $10,000 position. Higher leverage amplifies both gains and losses and brings liquidation price closer to entry on any perpetual exchange.
Long Position
A trade on a perp DEX that profits when the asset price increases. You 'buy' the perpetual contract expecting the price to rise. Losses occur if the price falls below your entry on any perpetual exchange.
Maintenance Margin
The minimum collateral that must be maintained to keep a position open on perp DEXs. If your margin falls below this level due to losses, your position will be liquidated. Typically 0.5-2% of position value on decentralized perps.
Margin
The collateral deposited on a perp DEX to open and maintain a leveraged position. Initial margin is required to open; maintenance margin is the minimum to keep the position open. Can be cross (shared) or isolated (per-position) on most perpetual exchanges.
Maximum Leverage
The highest leverage allowed on a perp DEX or for a specific asset. Major pairs like BTC often allow higher leverage (100x) on perpetual exchanges while altcoins may be limited (20-50x).
Notional Value
The total value of a leveraged position on a perp DEX. Calculated as margin x leverage. A $1,000 margin position with 10x leverage has a $10,000 notional value. Fees on perpetual exchanges are typically charged on notional.
Position Size
The notional value of your trade on a perp DEX. Larger positions require more margin on perpetual exchanges. Should be sized based on your risk tolerance and account size when trading perps.
Short Position
A trade on a perp DEX that profits when the asset price decreases. You 'sell' the perpetual contract expecting the price to fall. Losses occur if the price rises above your entry on perpetual exchanges.
Risk
ADL (Auto-Deleveraging)
A mechanism on perp DEXs where profitable positions are automatically reduced to cover losses from liquidated positions when the insurance fund is depleted. Rare but possible during extreme volatility on perpetual exchanges.
Clawback
A socialized loss mechanism on perp DEXs where profits are reduced across all traders to cover losses from bankrupt liquidations. Rare on well-capitalized perpetual exchanges with sufficient insurance funds.
Insurance Fund
A pool of funds maintained by perp DEXs to cover losses from liquidated positions that go bankrupt. Prevents socializing losses through clawbacks on well-capitalized perpetual exchanges.
Liquidation
Forced closure of a position on a perp DEX when margin falls below the maintenance requirement. The perpetual exchange closes the position to prevent further losses. A liquidation fee is typically charged on all perp trading platforms.
Liquidation Price
The price at which a position will be automatically closed on a perpetual DEX. Calculated based on entry price, position size, leverage, and maintenance margin. Can be pushed further away by adding more margin or using lower leverage on perp platforms.
Pricing
Index Price
The weighted average spot price from multiple exchanges used by perp DEXs. Used as a reference for funding rate calculations and to anchor the perpetual price to fair value on decentralized perps.
Last Price
The most recent trade price on a perpetual exchange. May differ from mark price due to temporary supply/demand imbalances on perp DEXs. Not typically used for liquidation calculations.
Mark Price
A fair price on perp DEXs calculated from multiple sources (typically spot exchanges) used for liquidation calculations. Prevents manipulation of liquidations through temporary price spikes on perpetual exchanges.
Orders
Maker Order
An order on a perp DEX that adds liquidity to the order book (typically limit orders that don't immediately execute). Usually pays lower fees than taker orders on perpetual exchanges, and some perp platforms offer maker rebates.
Post-Only Order
An order on a perp DEX that will only be placed as a maker order. If it would immediately match (become a taker), it's rejected. Guarantees maker fees/rebates on perpetual exchanges.
Reduce-Only Order
An order on perp DEXs that can only reduce an existing position, never increase it. Useful for setting take-profits or stop-losses on perpetual exchanges without accidentally reversing your position.
Stop-Loss Order
An order on a perp DEX that automatically closes your position when price reaches a specified level, limiting losses. Essential for risk management on perpetual exchanges.
Take-Profit Order
An order on a perp DEX that automatically closes your position when price reaches a specified profit target. Locks in gains on perpetual exchanges without requiring constant monitoring.
Taker Order
An order on a perp DEX that removes liquidity from the order book (typically market orders). Pays higher fees than maker orders on perpetual exchanges but guarantees immediate execution on perp trading platforms.
Execution
Order Book (CLOB)
A list of all open buy and sell orders on a perp DEX, organized by price. Traditional perpetual exchange model where orders are matched between buyers and sellers. Shows market depth and liquidity on perp platforms like Hyperliquid and Lighter.
RFQ (Request for Quote)
A trading model on perp DEXs where market makers provide custom quotes for each trade. Often offers tighter spreads for large orders than traditional order books. Used by perpetual exchanges like Variational.
Slippage
The difference between expected and actual execution price on perp DEXs. Occurs in thin markets or with large orders on perpetual exchanges. Higher during volatility. Can be minimized with limit orders on perp platforms.
Spread
The difference between the best bid and ask prices on a perp DEX. Tighter spreads indicate better liquidity on perpetual exchanges. RFQ platforms like Variational quote custom spreads based on trade size.
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