Futures Trading Glossary — From Long & Short to Slippage

Direction & positions

• Long / Buy — Entering a trade betting the price will rise.
• Short / Sell — Entering a trade betting the price will fall. Shorting is a built-in feature of futures, so you can trade falling markets too.
• Position — The buy or sell contract you currently hold.
• Close — Exiting a position with the opposite trade, locking in the profit or loss.
• Take Profit (TP) — Closing while the position is in profit. Set a target price in advance and it closes automatically.
• Stop Loss (SL) — Closing to cap a loss at a size you decide ahead of time. → Leverage and risk management

Order types

• Market — Fills immediately at the current quote.
• Limit — A resting order that fills only when price reaches the level you set.
• Stop order — Triggers once price breaks through a specified level (used for breakout entries and stop losses).
• OCO (One-Cancels-the-Other) — Two orders linked so that when one fills, the other is automatically cancelled.

Price & cost

• Bid / Ask — The bid is the price buyers offer; the ask is the price sellers demand. You buy at the ask and sell at the bid.
• Spread — The gap between bid and ask. It acts as a real cost the moment you enter. → How trading fees work
• Slippage — The difference between your intended price and the price you actually get filled at. It grows when volatility is high or liquidity is thin.
• Tick / Tick value — The minimum price increment, and the profit or loss per single tick. → Ticks and tick value
• Pip — A small price-movement unit used mainly in FX (sometimes used interchangeably with “tick” depending on the instrument).

Margin & leverage

• Margin — The good-faith deposit you post to open a position. → Understanding margin
• Leverage — The ratio between your position size and the margin behind it. It magnifies gains and losses by the same factor.
• Margin call — When unrealized losses drag your balance below the maintenance margin and additional funds are required.
• Forced liquidation (stop-out) — If a margin call isn’t met, the broker closes your position automatically.

Contracts & timing

• Expiry / Rollover — Futures contracts have an expiration date; to stay in a trade past it, you roll into the next contract month. → Expiry and rollover explained
• Open interest — The total number of contracts still open and not yet closed.
• Tick volume — The number of ticks (price changes) within a candle. Commonly used for the volume bars on a chart.
• Mini & micro contracts — Smaller-sized versions of the standard contract. → Mini and micro futures

Prop trading

• Prop trading — Trading with a firm’s capital (not your own) and sharing the profit. → What is prop trading
• Funded account — The firm-capital account you get after passing a challenge (usually still simulated at first).
• Challenge / evaluation — A paid evaluation where you hit a target inside the rules. 1-step, 2-step, or instant funding. → Challenge types
• Drawdown — The allowed loss limit, split into daily (per day) and max (whole account). The biggest cause of failure. → Drawdown rules
• Trailing drawdown — A fail line that rises with the account’s highs; giving back profit you already made can breach it.
• Consistency rule — A rule that no single day’s profit may be too large a share of the total. → Consistency rule
• Profit split — The ratio the funded-account profit is divided between trader and firm (e.g. 80/20).
• Payout — Actually settling and withdrawing the profit you made. → Payouts and scaling
• Scaling — A conditional plan that grows the managed account as you keep getting paid.
• Minimum trading days — The least number of trading days required to pass or get a payout.

Find these terms on a real order screen

Definitions stick faster once you have seen the thing they name. In Merini’s free web demo you can watch the bid and ask sit apart from each other, place a market order and then a limit order and see why one fills instantly while the other waits, and attach a stop loss and take profit to a position that is actually moving. Margin call and forced liquidation are the entries most worth meeting here, on virtual money, rather than on a live account → Meet the terms on screen

Frequently asked questions

Are “buy/sell” and “long/short” the same thing?

Yes. Buy equals long (betting on a rise) and sell equals short (betting on a fall) — they’re just different words for the same two directions.

How is “shorting” even possible?

Futures are structured so you can sell first and buy back later to settle, which means you can enter a short without owning anything first. That lets you aim for profit in a falling market, though the risk is exactly the same as going long.

Related reading → What are futures? · How to get started