Perpetual futures, usually called perps, are contracts that let traders speculate on an asset's price without owning the asset itself. You can go long if you think the price will rise, go short if you think it will fall, and keep the position open as long as you maintain enough margin.

The key difference from traditional futures is that perps do not expire. A quarterly futures contract settles on a fixed date. A perp keeps trading continuously and uses funding payments to help the contract price stay close to the underlying market.

What a perp tracks

A perp market usually tracks an underlying index or spot market. BTC-PERP tracks Bitcoin exposure. SOL-PERP tracks Solana exposure. A meme coin perp tracks the price of that meme coin without requiring you to hold the spot token.

When you open a perp, you are not buying the token into your wallet. You are opening a leveraged position whose profit or loss changes as the market moves.

Longs and shorts

A long position profits when the perp price rises. A short position profits when the perp price falls. That ability to short is one reason perps are popular: traders can express both bullish and bearish views.

Shorting also adds risk. If you are wrong, losses can grow quickly, especially with leverage. A fast meme coin move can liquidate an overleveraged short just as easily as it can liquidate an overleveraged long.

Why perps use funding

Because perps do not expire, they need a mechanism to stay near the underlying price. Funding is a periodic payment between longs and shorts. When perps trade above the underlying index, longs often pay shorts. When perps trade below the index, shorts often pay longs.

Funding is not a trading fee charged by the venue. It is part of the contract design, and it can become expensive when one side of the market gets crowded.

The big risk: liquidation

Perps are margin products. You post collateral, open a position, and must keep enough account equity to support it. If the market moves against you far enough, the position can be liquidated automatically to prevent the account from going below required margin.

This is why perps should be learned slowly. The mechanics are not hard, but the consequences are faster than spot trading.

Before trading perps

  • Know your notional position size, not just your collateral.
  • Check your liquidation price before submitting the trade.
  • Understand whether funding is positive or negative.
  • Use leverage because it fits your risk plan, not because the app offers it.

Risk note: Perps are leveraged products. Losses can happen quickly, including liquidation. This article is educational content, not financial advice.