Are perpetual futures safe for beginners?

They are high risk because of leverage. Beginners should use low leverage (1x to 3x) and practise first.

Blog / Crypto

Perpetual Futures Explained: How Perps Work and Why They Have No Expiry

Perpetual futures let you trade crypto with leverage and no expiry date. Learn funding, mark price, margin and the main risks.

What a perp is

A perpetual future is a derivative that tracks the price of an asset such as BTC without an expiry date. You can go long or short with leverage and hold the position as long as your margin allows. You never own the coins, you hold a contract on their price.

How the price stays close to spot

Because there is no settlement date, exchanges use a funding rate. Every few hours (often every 8 hours, or hourly on some venues) one side pays the other. When the perp trades above spot, longs pay shorts, which pushes the price back down, and vice versa.

Margin, leverage and liquidation

You post margin (collateral). At 10x leverage a 10% adverse move wipes out the margin, so the exchange closes your position: this is liquidation. Exchanges compute liquidation from the mark price, an index-based price that avoids manipulation from a single order book.

Risks to understand

Leverage amplifies losses, funding can be a real cost when you hold for days, and exchange risk exists on centralised venues. Use isolated margin if you want to cap the loss to one position, and size the trade so a stop loss is hit long before liquidation.

Example: a funding payment

You are long 1 BTC worth $65,000 and the funding rate is +0.01% per 8 hours. You pay about $6.50 every 8 hours, or roughly $19.50 per day. Held for a month at that rate, funding would cost about $585, which can erase a small gain.

When funding is negative you would receive the payment instead. Always check the current rate before you hold a position overnight.

Checklist before your first perp trade

Know your liquidation price. Know the funding rate. Choose isolated margin. Set a stop loss before entry. Risk no more than 1% of your account. Check the exchange fee schedule and the maker versus taker difference. Try the whole process with the smallest size the exchange allows.

Key takeaways

No expiry; funding keeps perp near spot.
Liquidation uses the mark price.
Funding is a holding cost or income.
Place the stop well before liquidation.

FAQ

Are perpetual futures safe for beginners? They are high risk because of leverage. Beginners should use low leverage (1x to 3x) and practise first.

Educational content, not financial advice.