TradFi Dictionary: 16 key terms for trading smarter on Bybit

Bybit’s TradFi platform allows users to trade a wide range of traditional financial instruments — including forex, gold, commodities and stock contracts for difference (CFDs) — via MetaTrader 5 (MT5), a professional-grade trading terminal that supports fast execution, multi-asset access and customizable tools within a single interface.

Whether you're just starting out or transitioning from crypto into traditional finance, understanding the way this platform operates and the meanings of its key terms is essential for making informed decisions and managing trades effectively.

This article provides clear, concise definitions across four core areas — trading basics, risk management, order types and platform features — to help you build a working knowledge of the concepts and tools you’ll encounter while trading via Bybit TradFi.

Key Takeaways:

• Bybit TradFi is Bybit’s offering for trading traditional financial instruments — such as forex, stocks, commodities and indices — via MetaTrader 5 (MT5), a professional trading platform featuring advanced tools and automated trading.

• To trade confidently on Bybit TradFi, it’s crucial to have a firm grasp of key terms and concepts across three main domains: trading basics, risk management and order types/execution tools. 

Essential Bybit TradFi terms explained

1. Trading basics

The concepts below are essential to understand before placing your first trade.

CFD (contract for difference)

A contract for difference (CFD) is a financial contract that lets you trade the price movement of an asset without owning the asset itself. You profit or lose based on the difference between the opening and closing prices of the contract.

Commonly used for trading stocks and commodities, CFDs offer flexibility through leverage and shorting, but they also introduce added complexity as compared to spot trading.

Leverage

Leverage is the use of borrowed funds to increase your trading position beyond what your actual capital allows. It amplifies your exposure to price movements without requiring the full trade value up front. This means you can earn higher returns on smaller moves, but it also increases your risk since losses are similarly magnified.

For example, if you use 10x leverage to buy $1,000 worth of an asset, you only need $100 of your own money. If the price rises 5%, your profit is based on the full $1,000 — a $50 gain — not just your $100 investment. But if the price drops 5%, your loss is also $50, which is half of your initial $100.

Margin (initial vs. maintenance)

Margin is the amount of money locked or set aside to open and keep a leveraged trade active. Initial margin is what you need to put up to open a position, while maintenance margin is the minimum amount you must maintain to keep the position open (and avoid liquidation).

Margin and leverage are closely related but distinct concepts: margin is your actual invested capital, while leverage is the ratio of your total position size to that margin. Understanding this difference is important, because if your margin falls below the maintenance level, your position risks being liquidated — i.e., automatically closed to prevent further losses.

Lot/lot size

A lot (or lot size) defines the standardized quantity of an asset you trade in one contract with Bybit TradFi. The exact size varies depending upon the asset type: for example, forex, metals, commodities, oil and indices each have their own lot definitions.

Think of it like buying stocks in bundles. Knowing the lot size helps you understand how much of the underlying asset you’re actually controlling with each trade. This is important for accurately calculating commissions, margin requirements and position sizing.

P/L (profit and loss)

Profit and loss (P/L) shows how much money you’ve made or lost on a trade. 

Floating P/L refers to the unrealized profit or loss on open positions, a number that changes as the market moves. Realized P/L is the profit or loss locked in when you close a trade.

Tracking both types of P/L helps you monitor your trades' performance so you can decide when to cut losses or take profits.

2. Risk management

The concepts defined in the following section relate to tools and metrics that help you protect your capital and manage your risk.

Stop loss

A stop loss (SL) is an order that automatically closes a losing trade once the price reaches a specific level that you’ve chosen. It acts like a financial safety net, helping limit your losses by preventing a minor setback from turning into a much bigger loss.

Take profit

A take profit (TP) order automatically closes a trade when the price hits a level where you want to secure your gains. It helps you lock in profits, and acts as a discipline tool to prevent you from holding on to a position too long or overtrading.

Slippage

Slippage is the difference between the price you expect when placing an order and the price at which it executes. 

Rates of slippage can grow larger during volatile moments — such as major economic reports or earnings announcements —when prices move fast and liquidity can be thin. This means your order might fill at a less favorable price than you planned, increasing your costs or losses. 

Knowing about slippage helps you anticipate these risks, adjust your order types or size and avoid surprises in volatile markets.

Swap (overnight interest)

Swap, also called overnight interest, is a fee or interest charged for holding a position overnight. The amount depends upon whether you’re going long (buying) or short (selling), and reflects market interest rates such as interbank lending rates.

Swap mostly applies to forex and CFDs, as different rates for buying and selling affect cost. Knowing about swaps is essential because these fees can reduce your profits — or increase losses — if you hold positions for several days or longer.

[The swap defined above shouldn’t be confused with the swap ubiquitously known in crypto trading as the direct exchange of one cryptocurrency for another.]

Index price

The index price is a fair, average price calculated from data across multiple exchanges and liquidity sources. It helps ensure your trades are based on a stable and balanced market value, rather than sudden moves on any single platform. 

Index price is critical because it reduces the risk of price manipulation, and serves as a reliable basis for calculating your profit, loss and margin requirements. In this way, index price helps to prevent unexpected surprises when you check your account.

NOP (net open position)

Net open position (NOP) is the total combined value of all your open trades on a platform. 

Bybit and other trading platforms set limits on the maximum NOP you can hold, in order to manage overall risk. Knowing your NOP helps you understand your total market exposure, and ensures that you don’t exceed those platform limits.

3. Order types and execution

The concepts below are used to describe the way that trades are placed and filled.

Market order

A market order is an instruction to buy or sell an asset immediately at the best available price on the market. This type of order prioritizes execution speed over price certainty, making it useful when you want to enter or exit a position quickly.

However, market orders can suffer from slippage, because prices can change rapidly — especially during periods of high volatility or low liquidity.

Limit order

A limit order lets you set a specific price at which you want to buy or sell an asset. The trade only executes if the market reaches that price, or better. This gives you control over your entry or exit price, helping you avoid buying too high or selling too low. A limit order is useful for planning trades around key price levels and managing risk more precisely.

Execution price

Execution price is the actual price at which your order is filled — which can differ from the price you expected. This discrepancy often occurs because of slippage — that is, when market conditions change between placing your order and its execution. 

Execution price matters because it determines your true entry or exit point, thus affecting your profit or loss and the degree to which your trade matches your plan.

Spread

Spread is the difference between the lowest price a seller is willing to accept (ask) and the highest price a buyer is willing to pay (bid). It represents the cost of trading, and can widen during volatile or low-liquidity periods. 

The screenshot below shows the buy (ask) price of 44,453.5 USDT and the sell (bid) price of 44,452.5. The difference between the two prices is 1 USDT, which represents the spread.

Liquidity

Liquidity describes the market’s ability to absorb large buy or sell orders without causing significant price changes to an asset. It impacts execution, since high liquidity means more volume and tighter bid-ask spreads, thus allowing trades to be filled closer to expected prices. Low liquidity means fewer participants and bigger price swings — which can cause slippage and wider spreads.

Conclusion

Knowing the key concepts and terms defined in this article is critical for confidently leveraging Bybit TradFi — a unique trading environment via the MT5 platform that allows you to access opportunities across multiple traditional finance categories, including forex, gold, commodities and stock CFDs.



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