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Overview of Perpetual Futures

Perpetual Futures are a type of derivative contract with no expiration date, allowing users to participate in market price movements—and potentially profit—by taking long (bullish) or short (bearish) positions without holding the underlying asset.

As one of the most widely used derivatives in the crypto asset market, perpetual futures offer flexible leverage mechanisms and convenient trading methods, making them suitable for a variety of trading strategies.

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I. Core Features of Perpetual Futures

  1. No Expiry Date Unlike traditional futures contracts, perpetual futures have no expiry or delivery date. Users can hold positions indefinitely as long as margin requirements are met.

  2. Support for Long and Short Positions

    • Long (Bullish): Profit from an expected price increase.

    • Short (Bearish): Profit from an expected price decrease. Trading opportunities exist in both rising and falling markets.

  3. Leverage Trading Perpetual futures support trading with leverage (e.g., 10×, 20×) to amplify position size.

    Please Note:

    • Leverage can magnify potential profits.

    • It also amplifies potential losses and liquidation risks.

  4. Price Anchoring via Funding Rate Since perpetual futures have no expiry, their price may deviate from the spot price. To keep the contract price aligned with the spot market, a Funding Rate mechanism is used, where long and short traders periodically exchange payments to balance the market.

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II. Main Advantages of Perpetual Futures

  1. Trade Without Holding the Underlying Asset Users can directly participate in price movements without needing to purchase or hold the corresponding crypto asset in advance.

  2. Flexible Trading Methods

    • Open or close positions at any time.

    • Hold positions for extended periods.

    • Support partial position adjustments and flexible management.

  3. Suitable for Various Trading Strategies

    • Trend trading

    • Risk hedging

    • Volatility trading

    • Grid strategies, copy trading, etc.

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III. Key Risks of Perpetual Futures

While perpetual futures offer high flexibility, they also involve significant risks. Please fully understand the following:

  1. Leverage Risk Higher leverage magnifies the impact of price fluctuations on your position, increasing the likelihood of forced liquidation.

  2. Market Volatility Risk Crypto markets are highly volatile. Sharp price movements within short periods can lead to substantial gains or losses.

  3. Forced Liquidation Risk If your account margin becomes insufficient to maintain the current position, the system will trigger forced liquidation.

  4. Funding Rate Costs Holding positions for extended periods may require periodic funding rate payments, adding to overall trading costs.

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IV. Who Are Perpetual Futures Suitable For?

Perpetual futures are better suited for users who:

  • Have some trading experience.

  • Understand leverage mechanisms and associated risks.

  • Can manage positions and risks appropriately.

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