> For the complete documentation index, see [llms.txt](https://doc.rocky.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://doc.rocky.exchange/trading/trading-concepts.md).

# Trading Concepts

## Long and short

* **Long** - gains value when the market price rises and loses value when it falls.
* **Short** - gains value when the market price falls and loses value when it rises.

## Leverage

Leverage allows a trader to control a position larger than the margin committed.

For example, a 10x leveraged position uses 1 unit of margin to control 10 units of market exposure. This magnifies profit and loss and brings the liquidation price closer to the entry price.

Use leverage according to your own risk tolerance. The maximum permitted leverage should not be treated as a target.

## Order types

### Perpetual orders

* **Market order** - seeks immediate execution at the best available prices. The final execution price can differ from the price visible when the order is submitted.
* **Limit order** - remains open until it is filled at the specified price or better, or until it is cancelled.
* **Reduce-Only** - can be applied when an order should only reduce an existing position.

### Spot orders

* **Limit order** - buys or sells a spot asset only at the specified price or better. The required asset remains locked while the order is open.

Order functionality may vary by market. Always rely on the order panel for the functions available for the selected product.

## Mark price

The mark price is a reference price used for position valuation and liquidation checks. It is intended to reduce the impact of short-lived price dislocations or isolated trades.

Your unrealized profit and loss and liquidation status may be calculated using the mark price rather than the latest traded price.

## Funding

Funding payments help keep a perpetual market aligned with its underlying reference price.

* When the perpetual trades above the reference price, long positions may pay short positions.
* When it trades below the reference price, short positions may pay long positions.

Funding is exchanged between market participants according to the active market mechanism; it is not the same as a trading fee. Review the current funding rate and timing before holding a position through a funding event.

## Margin and liquidation

Margin supports an open leveraged position. If losses reduce available margin below the applicable maintenance requirement, the position may become eligible for liquidation.

Ways to reduce liquidation risk include:

* Using lower leverage.
* Reducing position size.
* Maintaining additional available margin.
* Monitoring the liquidation price.
* Using risk-management orders where available.

Liquidation controls are designed to protect market solvency, but they do not prevent user losses.