CRYPTO TRADING BASIC TERMS EXPLAINED IN SIMPLE WORDS PART 2

If you are trading in crypto, especially on perp DEXs like Hyperliquid, Variational, RiseX, Lighter, or similar platforms, you will keep seeing the same words again and again. 👇

Terms like APR, APY, funding fee, maker, taker, OI, vault, liquidation, slippage, RWA, and more.

If you do not understand these, it becomes very easy to take bad trades, pay extra fees, or misread the market.

This post explains the most important crypto trading terms in simple English, with examples like the previous post so check it out as well.

21) Mark Price

Mark price is a fair price used by the exchange to calculate profit, loss, and liquidation.

It helps prevent unfair liquidations caused by sudden wicks.

Why it matters

Sometimes the market price may spike briefly. The mark price tries to reduce fake liquidation events.

22) Index Price

Index price is usually a reference price from multiple markets or exchanges.

It helps decide the “real” value of an asset.

Mark price is often based on index price.

23) PnL

PnL means Profit and Loss.

Unrealized PnL

Profit or loss on an open trade that is not closed yet.

Realized PnL

Actual profit or loss after closing the trade.

Example:

You open a long

Price goes up

Your unrealized PnL shows profit

Once you close, it becomes realized PnL

24) ROI

ROI means Return on Investment.

It tells you how much profit you made compared to your original investment.

Example

You put $100

You make $20 profit

ROI = 20%

25) AUM

AUM means Assets Under Management.

It is the total value managed by a fund, vault, or protocol.

If AUM grows, it often means more trust or more capital entering.

26) TVL

TVL means Total Value Locked.

It is the total amount of assets deposited in a protocol.

Example

If a DeFi platform has $500 million TVL, that means users have locked that much value inside it.

TVL is often used to measure protocol size and trust.

27) Vault Yield

Vault yield means the return earned by a vault strategy.

It can come from:

trading fees

market-making

lending

staking

incentives

Yield is not always fixed. It can go up or down.

28) RWA

RWA means Real World Assets.

These are real assets brought onchain or represented in crypto.

Examples:

government bonds

treasury bills

real estate

invoices

private credit

commodities

Why RWA matters

RWA connects traditional finance with crypto.

Example:

A protocol tokenizes treasury exposure

Users can earn yield from real-world assets through blockchain rails

RWA is a big trend because it brings more stable and real yield into crypto.

29) Stablecoin

A stablecoin is a crypto asset designed to stay close to a fixed value, usually $1.

Examples:

USDT

USDC

DAI

Stablecoins are used for:

trading

payments

yield farming

parking funds in volatility

30) Collateral

Collateral is the asset you deposit to back your trade or loan.

Example:

You deposit USDC as collateral

You use it for leverage or borrowing

If your trade fails, the platform can use your collateral to cover losses.

31) Stop Loss

Stop loss is an order that closes your trade at a chosen loss level.

It helps protect capital.

Example

Buy BTC at $60,000

Set stop loss at $58,800

If price falls there, the position closes automatically.

32) Take Profit

Take profit is an order that closes your trade when you hit your target profit.

Example

Long BTC at $60,000

Take profit at $62,000

When price reaches that level, the system closes the trade.

33) Funding-Driven Trade

Some traders trade around funding.

Example

Funding is very positive

Traders may short to receive funding

This can work in some conditions, but it is not a free-money strategy. Trend can crush you if you fight the market.

34) Basis

Basis is the difference between spot price and futures price.

If perp price trades above spot, basis is positive. If perp trades below spot, basis is negative.

This matters in arbitrage and funding analysis.

35) Arbitrage

Arbitrage means taking advantage of price difference in two places.

Example

BTC is slightly cheaper on one exchange

Slightly higher on another

You buy low and sell high

Arbitrage usually gives small but lower-risk profit opportunities, though execution must be fast.

36) LP / Liquidity Provider

An LP is someone who puts capital into a pool to help trading or swaps happen.

LPs earn fees or rewards.

But LPs also face:

impermanent loss

smart contract risk

market risk

37) Impermanent Loss

Impermanent loss happens when the value of your LP deposit changes compared to just holding the assets.

It is called “impermanent” because it only becomes real if you withdraw after the price move.

This is an important risk in AMM-based DeFi.

38) AMM

AMM means Automated Market Maker.

It is a system that uses smart contracts and liquidity pools instead of a traditional order book.

Common in DEXs like Uniswap-style systems.

39) CEX and DEX

CEX

Centralized Exchange

Examples:

Binance

Bybit

OKX

A company controls the platform.

DEX

Decentralized Exchange

Users trade onchain without giving custody to a central company.

Perp DEXs are decentralized derivatives platforms.

40) Perp DEX

A perp DEX is a decentralized exchange for perpetual futures trading.

It combines:

leverage

long/short positions

funding payments

onchain settlement

self-custody

This is why perp DEXs are so important in crypto trading.

At last, Here is the easiest way to remember the most important terms:

APR = yearly return without compounding

APY = yearly return with compounding

Maker = adds liquidity

Taker = removes liquidity

Funding fee = payment between longs and shorts

OI = open positions in the market

Vault = pooled strategy or fund

RWA = real-world assets brought onchain

Leverage = bigger trade with smaller capital

Liquidation = forced closing of losing leveraged trade

Slippage = price difference between expected and actual fill