An A-Z of Essential Futures Trading Vocab
Futures trading is a new frontier to many, especially when it comes to the crypto space. Allow us to help make the transition a little easier by highlighting all your “need-to-know” futures trading vocab here.
In the traditional world of trading, there is seemingly an endless number of terms and phrases that apply to reading charts, labeling market impact, and trading strategies. Interestingly enough, there isn’t really much in the way of the underpinning technology.
In crypto futures trading most of those fancy terms aren’t applicable, or at least not yet. But combining traditional financial concepts with blockchain technology has made for an interesting mashup of words and meanings used in the space.
More importantly, for traders, there are terms that cross over. New futures trading vocab will have to be added to their lexicon when trading on the Digitex Futures Exchange.
It isn’t a Harry Potter book worth of words, but not all their meanings are as apparent as the word “trade.” And some sound more complicated than they really are, like “automated matchmaker.”
Futures Trading Vocab: A-Z of Need to Knows
Instead of having to read the whitepaper and watch multiple videos with people talking over your head, here, in plain English are the highlights of futures trading vocab that will help you better understand what things are and their function in the Digitex ecosystem.
After reading this list any newcomer to futures trading should have more confidence in their ability to use the exchange.
Automated Market Maker
These are trading bots and they help provide liquidity in the market by using a dedicated 20% of the tokens in circulation (200M DGTX tokens). The bots are programmed to break even which helps with supply and demand.
This is part of the underlying technology for the Digitex Futures Exchange. It’s basically a nonfungible decentralized ledger that keeps track of the transaction history of financial data.
Bitcoin, Ethereum & Litecoin Futures
BTC/USD, ETH/USD & LTC/USD are the markets that traders will be able to open contracts on.
Traders can start trading immediately without needing to register with personal documents that could put them at risk of identity theft from hackers. Digitex doesn’t have the same burden of AML/KYC requirements for traders because it’s offshore and the exchange only uses DGTX tokens.
Decentralized Account Balances
The Digitex exchange will use Ethereum smart contracts to hold the funds and account balances of traders. By not having custody, the risks of having hackers targeting the platform has been lowered.
Decentralized Governance by Blockchain
The DGTX Community will vote on how many and when tokens will be dispensed to meet projected demand after 2021. All token holders will have the right to vote. 1 DGTX token = 1 vote and voting power can be delegated to another trusted party.
This is the native currency of the exchange and required to operate in the ecosystem. All denomination of value (wins, losses, margin balance, and account balance) will happen in the DGTX token.
Digitex Peg System
It’s a futures smart contract, traders can use to lock in the price value of a DGTX token to avoid lower price volatility. The downside is if the value increases, tokens locked in the smart contract will not experience growth in value because they are locked in at the purchase price.
For those who are really new to futures trading. This is basically placing a bet on the price of an asset you do not own. What you’re betting on whether it will go up or down.
For the non-technical, gas is what is used in smart contracts to cover the cost of executing functions when interacting with the Ethereum blockchain. Unfortunately, it’s a cost that can’t be zeroed out, but can be reduced by carrying out most transactions off-chain.
In the finance world, it is a way to reduce how much you lose when the trade doesn’t end in your favor. One example is getting car insurance. It won’t stop an accident, but you won’t lose everything if one happens.
Digitex Futures market offers traders very high leverage of up to 100×, allowing them to fulfill large percentage gains (and losses) from relatively small price movements.
Large Tick Sizes
A tick is the smallest price increment a contract can move by either up or down. This is a feature currently only used by Digitex and is set at $5. It works in tandem with the enhanced user UX for one-click ladder trading.
Leverage allows traders to commit a small amount of money to make a big trade. Digitex Futures will grant very high leverage to its users.
This is the lifeblood of trading. It basically means how fast are you able to buy or sell an asset without much effect on the market value
This is where the trader doesn’t have to have the full value amount of the contract when opening contracts. This is possible on Digitex because it uses a central server to track trading account balances.
No Auto Deleveraging
The exchange will not close out any position to save itself when a counterparty trade is too highly leveraged. The contracts will close out without meddling from the exchange no matter who has the winning or losing position.
Oﬀ-Chain Price Discovery, On-Chain Settlement
Digitex uses smart contracts to hold funds and process transactions between the counterparties on what is called a side chain. Price discovery is achieved in real time. The “on-chain” part means the closing of the contract and payouts are done on the blockchain. This process provides the benefits of speed and security when trading on futures.
One-Click Ladder Trading Interface
The UX ladder interface that allows traders to buy and sell orders with a single click. Traders see the market moving in real time up and down and can take action with one finger-click.
This is what happens when you exit or enter a trade and the price is a little different from what you were expecting. Digitex will help to reduce or cancel out slippage by implementing the DGTX Peg System.
Smart contracts are basically programmable contracts that Digitex uses to hold traders’ funds during open futures contracts and to keep them independent and tamper-resistant.
Sub-Millisecond Order Matching
By using some centralized technology, Digitex is able to match orders in less than a millisecond. The UX is a web browser that doesn’t need to be downloaded and updates prices in real time. The exchange is highly scalable to millions of concurrent users if needed.
Token Issuance Revenue Model
This is the innovative business model used to eliminate trading fees for the exchange. The issuance of new DGTX tokens will be voted on by the community and sold for revenue after 2021. All trading fees and operational costs have been covered by funds raised during Digitex’s ICO.
These are what would be charged if this was another platform. Digitex Futures is a zero-trading fee crypto futures exchange.
By combining a central server for matching making and smart contracts to control funds, a trustless trading environment is achieved. Technically it is reduced-trust, which means lowering how much trust traders place in the exchange holding their money while trading.
Zero Trading Fees
The Digitex Futures Exchange is the first of its kind to have no trading fees at all. Traders can make an unlimited number of Maker orders or Taker orders at any time under any circumstances with no worry of a commission fee.
Wrapping It Up
Whether new or old to the trading space, some of the highlighted meanings of the words may not be guessable at first glance. But hopefully, this futures trading vocab list is a good icebreaker for those new to the world of crypto futures trading. And a valuable crash course for the more experienced traders.
With the Digitex Futures going live this Q4, it’s helpful to get an understanding of the terms now. And if you want to join the first 5,000 traders to try out the exchange with free money on us, sign up for our Early Access Waitlist today!