Key Futures Trading Terms Explained
Liquidation Realized P&L (Profit and Loss)
This refers to the profit or loss generated from a user's closed positions between the previous delivery settlement time and the current timestamp. Realized P&L impacts account equity and can be used as margin collateral, though it remains non-withdrawable. Only after a futures contract settlement occurs can these profits be withdrawn to the trading account.
Liquidation Unrealized P&L
The floating profit/loss from a user's open positions. During daily contract settlements at 16:00 (4 PM), unrealized P&L converts to account balance, resetting to zero before recalculating.
Long/Short Liquidation
Isolated Margin: When a position's "used margin" is fully depleted, the system forcibly closes that specific position.
Cross Margin: When account equity (deposits + realized P&L + unrealized P&L) is exhausted, all positions undergo forced liquidation.
Delivery Settlement
Upon contract expiration (e.g., weekly Friday 4 PM settlements), the system uses the arithmetic mean of the last hour's USD index as the delivery price to settle all open contracts. Resulting profits/losses merge into realized P&L.
Liquidation Surplus
The residual value when forced liquidation occurs. Execution prices may slightly deviate from liquidation prices during order matching, creating this surplus.
Loss Coverage Sharing
During extreme volatility where positions can't liquidate at target prices, losses exceeding margin occur. OKX implements a "loss sharing" mechanism where weekly profitable users proportionally cover these deficits.
The Significance of Key Pricing Metrics
Latest Transaction Price vs. Index Price vs. Mark Price
Latest Transaction Price: Real-time trade execution price visible in the order book.
Index Price: Calculated from weighted averages across ≥3 major exchanges' trading pairs. It anchors contract valuations (e.g., coin-margined contracts track the USD index).
Mark Price: Used to prevent unnecessary liquidations during volatility, combining index price with basis rate (funding cost differential between futures and spot markets).
Advanced Trading Concepts
Head-and-Shoulders Top Pattern
A bearish reversal pattern resembling a human silhouette:
- Left Shoulder: Initial price peak followed by decline.
- Head: Higher peak with subsequent drop.
- Right Shoulder: Lower rally failing to surpass the head.
Example: Ethereum/USDT charts often exhibit this structure, signaling exit opportunities.
Spot Martingale Strategy
An 18th-century probability-based approach:
- Mechanism: Double investment after losses to recover previous deficits upon eventual wins.
- Application: Requires substantial capital to sustain consecutive loss cycles while maintaining high win probability.
Technical Optimization
DNS Configuration for Network Stability
Windows/Mac Guide:
- Access Network Settings
- Modify adapter properties
- Input preferred DNS (e.g., Google's 8.8.8.8 or Cloudflare's 1.1.1.1)
👉 Optimize your trading platform connectivity
Strategic Trading Approaches
Arbitrage Order Execution
Market Role: Corrects price deviations during irrational volatility.
User Benefit: Reduces directional prediction dependence through:
- Automated profit-taking
- Limited-risk position hedging
👉 Explore advanced arbitrage tools
Digital Asset Options Primer
Addressing trader dilemmas:
- High Leverage + Low Risk: Options provide capped downside.
- Auto Execution: Built-in strike prices eliminate manual exit decisions.
- Direction-Neutral Profits: Strategies like straddles profit from volatility regardless of market direction.
FAQ Section
Q: When can realized P&L be withdrawn?
A: Only after the relevant futures contract undergoes settlement.
Q: How does mark price prevent unfair liquidations?
A: By using index-based pricing rather than volatile last-traded prices.
Q: What's the main risk in martingale strategies?
A: Consecutive losses exponentially increase required capital, risking account depletion.
Q: Why do arbitrage opportunities exist?
A: Market inefficiencies create temporary price disparities between correlated assets.
Q: How often does unrealized P&L settle?
A: Daily at platform-specified settlement times (e.g., 16:00 UTC+8).
Disclaimer: Content may reference products unavailable in your region. This informational guide adheres to strict compliance standards, excluding financial advice or promotional material. All trading involves risk—assess suitability per your jurisdiction's regulations.
© 2025 OKX. Permitted non-commercial sharing with attribution.