# Crypto Futures Definitions and Examples: 7 Trading Terms Every Trader Should Know!

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## Metadata
- Author: [[Binance Pay]]
- Full Title: Crypto Futures Definitions and Examples: 7 Trading Terms Every Trader Should Know!
- Category: #articles
- URL: https://www.binance.com/en/blog/futures/crypto-futures-definitions-and-examples-7-trading-terms-every-trader-should-know-421499824684902579

## Highlights
- Using volume as a measurement can be helpful for traders especially if they are interested in knowing the strength of market trends. Often, volume can be used to make sense of volatility, especially in crypto markets.
- Traders should use a leverage amount that suits them.
- Binance operates multiple insurance funds to ensure that losses are sufficiently covered in extreme volume spikes.
- 1. Funding Rates
- Funding rates calculation consists of the interest rate and the premium
- These rates are often used by exchanges and markets to prevent any divergences in the price of either market.
- high funding rates often occur in bull markets where traders believe the market is going up so strongly that they are willing to pay a premium to go long.
- 2. Open Interest
- Often open interest is considered to be closely related to volume, the next term on our list.
- 3. Volume
- Using volume as a measurement can be helpful for traders especially if they are interested in knowing the strength of market trends
- 4. Leverage
- It has the capacity to win a trader substantial profits on a given trade. But for just as lush as this reward may be, traders are also at risk of losing by the same magnitude
- An appropriate leverage amount is determined by a trader's expertise, risk tolerance, and comfort level while trading in cryptocurrency markets. Novice traders should always use caution as they learn how to trade and gain expertise.
- 5. Initial & Maintenance Margin
- 6. Liquidation
- if you select leverage of 20x, your initial margin will be 5% of the position’s total value
- Maintenance margin is based on a position at different notional value tiers
- Liquidation is, perhaps, the scariest term in futures trading; it’s certainly one that everyone should look to avoid. In futures trading, liquidation refers to the force-selling of losing positions to prevent them from falling to negative equity.
- Liquidation can happen either slowly or quickly, depending on the amount of leverage used in a trade
- 7. Insurance Funds
- Final Thoughts
- trading futures without a foundational understanding of these seven basic terms could be costly and perhaps foolish. Futures trading is complex and can be incredibly risky, which is reason enough for traders to understand how each part of a trade works.