A perpetual future (“perp”) is a futures contract that never expires. You can hold a long or a short indefinitely — which is exactly why three mechanics you can mostly ignore in spot trading become the whole game here: funding, margin and liquidation.
Funding: the price of staying in
With no expiry date, something has to keep the perp's price tied to the underlying asset's price. That something is the funding rate: a periodic payment between longs and shorts. When the perp trades above the index, longs pay shorts — pushing the price down. Below the index, shorts pay longs.
Practical consequences: funding is a recurring cost (or income) of the position, it compounds over days, and an extreme funding rate is information — it tells you which side of the boat is crowded. A trade that's right on direction can still bleed out paying funding.
Margin: what you actually put at risk
Perps are traded with leverage: you post margin — collateral — and control a position several times its size. Two margin modes matter:
- Cross margin: your whole account balance backs every position. Efficient — and dangerous, because one bad position can drain collateral from all of them.
- Isolated margin:a fixed amount backs one position. If it fails, you lose that amount and nothing else. This is the “cap the downside per trade” tool.
Leverage multiplies both directions. 10× leverage means a 10% adverse move wipes the margin — before fees and funding.
Liquidation: the forced exit
If the market moves against you far enough that your margin no longer covers the position's losses, the protocol closes it for you — liquidation. You don't get asked. The liquidation price is computable in advance, and a serious terminal shows it to you before you open the position.
Survival hygiene, in order of importance:
- Size the positionso a normal bad day doesn't threaten liquidation. Position size is risk control; leverage is just its expression.
- Set the stop when you open — a stop-loss decided in advance is a decision; one improvised during a drawdown is a hope.
- Know your liquidation priceand keep it far from the market's normal noise.
- Watch fundingon positions you hold for days — it's a silent PnL line.