After opening the Binance Official Website or the Binance App (iOS users should check the Binance App Download guide first), beginners are often overwhelmed by various terms—"Spot," "Futures," "USDⓈ-M," "Transfer," "Slippage," and so on. This article explains the 8 most common Binance terms in plain English so you can navigate the interface with confidence.
Term 1: Spot
One-line explanation: Swapping "real money" for "real coins." Once you buy them, they are yours, and you benefit or lose based on the price change.
Detailed explanation: Spot trading is essentially "instant delivery." If you use USDT to buy 1 BTC, that BTC enters your wallet. If the BTC price doubles, your asset value doubles. If it drops to zero, your maximum loss is the initial cost you paid—you will never owe the exchange money.
Where to find it: In the App, go to "Trade → Spot" at the bottom. On the web version, go to "Trade → Spot" at the top.
Who is it for?: All beginners. It has the lowest risk and the most intuitive rules.
Term 2: Futures
One-line explanation: Derivative trading using leverage to amplify position sizes. You don't hold the actual coins; profits and losses are settled based on the price difference between opening and closing a position.
Detailed explanation: Futures are essentially a "bet on price direction." If you bet BTC will go up (Long) with 10x leverage and a 100 USDT principal, you can buy a BTC futures contract worth 1000 USDT. If BTC rises by 1%, you earn 10 USDT (a 10% return). However, if BTC drops by 10%, your entire principal is wiped out (Liquidation).
Why Futures are riskier than Spot:
- Leverage amplifies losses; a small price drop can lead to liquidation.
- You can "Short" (bet on a price drop), and beginners often guess the wrong direction.
- Funding rates (deducted every 8 hours) can eat away at long-term holdings.
Who is it for?: Definitely not beginners. We recommend trading Spot for at least six months to understand trends and risks before touching Futures.
Term 3: USDⓈ-M vs. COIN-M
These are the two sub-categories of Futures.
USDⓈ-M Futures: Uses USDT (or USDC) as collateral, and profits/losses are also settled in USDT. Beginners should look at USDⓈ-M first because USDT is a stablecoin, making the PnL amount easy to understand.
COIN-M Futures: Uses the coin itself as collateral (e.g., using BTC as collateral for a BTC contract), and profits/losses are settled in the corresponding coin. This is for advanced players who are long-term bullish on a specific coin and want to use it to generate more of that coin.
Examples:
- You expect BTC to rise by 10%, so you open a 10x USDⓈ-M Long position to earn USDT.
- You already hold BTC and plan to keep it long-term, so you open a COIN-M position for Delta-neutral arbitrage.
Term 4: Transfer
One-line explanation: Moving funds between different wallets within Binance—free and instant.
Detailed explanation: Binance divides user assets into multiple wallets: Spot Wallet, Futures Wallet, Earn Wallet, Funding Wallet, etc. Moving funds from one wallet to another is called a "Transfer."
Scenarios:
- You have 100 USDT in Spot and want to trade Futures: Transfer from Spot to the USDⓈ-M Futures Wallet.
- You closed a Futures position with a 20 USDT profit and want to save it in Earn: Transfer from Futures to the Earn Wallet.
- USDT bought via C2C goes automatically to the Funding Wallet; you must transfer it to the Spot Wallet to start trading.
Where to find it: In the "Wallets" tab, tap the "Transfer" icon next to each sub-wallet.
Term 5: Slippage
One-line explanation: The difference between the price you expect to pay and the actual execution price.
Detailed explanation: When you place a Market Order, the system "eats" existing sell orders in the order book, matching them sequentially from the best available price. If your order is large, higher-priced sell orders will be hit, making your average execution price higher than the "last price" shown when you clicked—this difference is slippage.
When is slippage high?:
- Low liquidity trading pairs (small-cap or unpopular coins).
- Large market orders (e.g., buying 100,000 USDT worth of a small-cap coin at once).
- Extreme market volatility (during rapid price spikes or crashes).
How to reduce slippage: Use Limit Orders instead of Market Orders to set a maximum price you are willing to pay.
Term 6: Liquidation
One-line explanation: In Futures trading, when your collateral (margin) is exhausted by losses, the system forcibly closes your position, and your principal goes to zero.
Detailed explanation: Futures have a "Maintenance Margin Rate." If your account falls below this threshold, the system triggers a forced liquidation. For example, with 10x leverage on a BTC Long, a roughly 10% drop in BTC price could lead to liquidation.
Will I owe the exchange money after liquidation?:
- Binance has an "Auto-Margin" feature and a "Risk Insurance Fund."
- Generally, liquidation only results in the loss of your principal; you won't end up in debt.
- In extreme market conditions (gap down/up), losses could exceed principal—but Binance's Insurance Fund usually covers this, so users don't have to pay out of pocket.
Three Rules to Avoid Liquidation: Use no more than 5x leverage, keep position sizes under 30% of your principal, and always set a stop loss.
Term 7: Take Profit / Stop Loss (TP/SL)
One-line explanation: Pre-setting a "trigger price" when placing an order. Once the price is reached, the system automatically closes the position to lock in profit or limit loss.
Use cases:
- Take Profit (TP): You buy BTC at 70,000 and think 80,000 is a good target. Set TP=80,000, and it will sell automatically when the price hits, no monitoring required.
- Stop Loss (SL): You worry BTC might crash if it falls below 65,000. Set SL=65,000 to sell automatically if it drops that far, locking in a small loss.
Must-use for beginners: Stop losses can save your life. Many liquidations happen because of a "maybe it will bounce back" mentality. Always set a stop loss when trading Futures.
Term 8: OTC / C2C
OTC (Over The Counter): Large-scale trades between institutions; ordinary users rarely use this.
C2C (Customer to Customer): Users buying and selling coins directly with each other, with Binance acting as an escrow/guarantor. Buying USDT from a merchant using your local currency is a typical C2C transaction.
C2C Process:
- Choose a merchant (pick reliable ones with a 95%+ completion rate and 1000+ orders).
- Binance freezes the merchant's USDT. You transfer payment to the merchant's provided account.
- Once the merchant confirms receipt, Binance releases the USDT to you.
C2C is the primary way for many users to deposit funds. Crucial: Never write sensitive words like "USDT," "crypto," or "investment" in the payment remarks, as this can trigger bank risk controls.
FAQ
Q: What is the difference between coins bought in Spot vs. Futures?
A: Buying in Spot = You actually own the coin and can withdraw it to a wallet. Buying in Futures = You hold a contract position; your PnL is settled (in USDT or coins) when you close it. The contract itself is not the actual coin.
Q: Is it okay if I only do Spot trading as a beginner?
A: Absolutely. 99% of beginners should stick to Spot trading. Futures are a tool for professional traders.
Q: Are there fees for internal transfers?
A: Transfers between all wallets within Binance are completely free. You only pay network transaction fees when transferring to another platform (e.g., from Binance to another exchange).
Q: Is 0.5% slippage normal?
A: For major pairs (BTC/USDT, ETH/USDT), slippage is usually under 0.01%. For small-cap coins, 0.5% is normal. Anything over 1% indicates poor liquidity; consider using a Limit Order or choosing a different pair.