What Is a Perp? Perpetual Futures Explained
// Most traders learn what a perp is by donating their account to the market. Read this instead. Spot vs perp, why max leverage is a countdown, the three prices, and the one rule that keeps an account alive.
Most traders learn what a perp is by donating their account to the market. There is a cheaper classroom, and you are sitting in it. By the end of this briefing you will know what a perpetual actually is, why max leverage is a countdown rather than a flex, and the one rule that keeps an account breathing long enough to get good.
This is the written companion to the first briefing in THE SURVIVAL SERIES. Watch it, read it, or run both — the video is up top, the field manual is below.
// SPOT VS PERP — THE COIN OR THE BET
There are two ways to bet a coin goes up, and the first one you already know. Spot: you buy the actual coin, you own it, and the position never expires. Bitcoin runs from eighty thousand to a hundred and you are holding twenty grand of real BTC. It craters to forty and you are holding forty grand and a waiting game. That is the whole mechanic — ownership, and patience.
A perpetual is the other door. You do not buy the coin. You open a contract that says: this goes up. If it does, the contract pays. If it does not, it eats your collateral. You never hold the coin, you never deliver it, and the contract never expires — which is exactly why it is called perpetual. It settles in stablecoin.
Long profits when price climbs. Short profits when it falls. Which means you can bet against a coin you do not own, and that is not a loophole — that is the entire point. It is the door everything else in this briefing walks through.
The mechanical version — order matching, settlement, and what the venue is actually doing under the hood.
// LEVERAGE AND LIQUIDATION — THE COUNTDOWN
A perp lets you put up less money than the position is worth. Put up one hundred dollars at 3x and you control three hundred. The coin ticks up one percent and you make three percent on your hundred instead of one. That is the part everybody signs up for.
Here is the part nobody reads. The multiplier works identically in the other direction, and it does not care which way you hoped. At 5x, a twenty percent move against you takes the entire hundred. Position closed, money taken, no appeal. The math is brutal and it is symmetric.
Margin — the money you put up. The buffer between you and the exit. Liquidation — the point where your losses have chewed through that buffer and the venue force-closes the position before your balance can go negative. Your collateral does not come back.
Some venues will let you crank the multiplier to a thousand-to-one, and the honest ones tell you not to. At that setting you are not trading and you are not brave — you are flipping a coin with extra steps and paying fees for the privilege. Size the multiplier so that being wrong is tuition instead of a funeral.
Run the number before you click, not after. Feed your entry, your size, and your margin into the calculator and find out exactly where the cliff edge sits on your map.
// FIND YOUR LIQUIDATION PRICE// FUNDING — THE TAX ONE SIDE ALWAYS PAYS
Nothing physically chains a perp to the real coin. No delivery, no expiry, no settlement date to force the two prices together. So the venues invented a rope: a small payment passed between the two sides of the trade, every interval, dragging the contract back toward spot.
The direction tells you who is crowded. Perp trading above spot means the longs are too greedy, so longs pay shorts. Below spot, shorts pay longs. In the moment it is hundredths of a percent and it feels like rounding error.
It is not rounding error. A rate of five hundredths of a percent, paid every hour, annualises to roughly four hundred and thirty-eight percent. Hold the crowded side of a hot market and you are paying a heavy tax for the privilege of hoping — hour after hour, whether the trade works or not.
That tax is also the opportunity. Find the markets where one side is paying heavily to hold the trade, and make sure the payer is not you.
// PRICE THE FUNDING BILLThe full primer on funding mechanics, intervals, and how the payment is actually calculated.
// THE THREE PRICES
Every perp screen shows three prices, and confusing them is one of the most common ways a beginner gets rekt while staring straight at the answer.
| Price | What it is | What it does to you | |---|---|---| | Index | The average of spot across the big venues | The closest thing to the truth | | Mark | The index blended with funding | The number that triggers your liquidation | | Last | The most recent trade on this venue | The prettiest and the most useless |
Last price wicks and lies when the book is thin. A wick can stab straight past your liquidation level for a heartbeat, and if the mark price did not move, you live. Let the mark drift quietly past your line and you are done — even if the chart never visibly touched it.
So watch the mark and set your stops against the mark. The chart can lie. The mark does not.
// MARGIN MODE — WALL OFF THE BLAST RADIUS
When you open a position your collateral runs one of two ways. Isolated: only the margin you assigned is on the line, and if it liquidates, the rest of the account is untouchable. Cross: the whole balance backs that position, pulling from everything else to keep the trade alive — right up until it cannot, and then it all goes down together.
Cross has real uses. Hedging and offsetting positions both want it. In untrained hands it is a foot-gun that takes the entire account in one motion, which is why the rule holds until you can explain precisely why you are breaking it: first trades are always isolated. Size the fence before you light the fire, and never fence in money you need in the real world.
// SIZE THE POSITION FIRST// THE BOOK — MAKER VS TAKER
The order book is every buy and sell order waiting to fill: bids below the price, asks above. When you trade you are one of two things. A taker hits an order already sitting there — instant fill, higher fee. A maker posts an order that waits in the book — it might never fill, but the fee is lower and sometimes it pays a rebate.
Beginners default to market orders, which makes them takers on every trade. That is fine while the size is small. As size grows, posting instead of taking saves real money on every round trip. Fees are a tax you get to choose the rate on, and most traders never open the menu.
// OPEN THE COST LEDGER
// REDUCE-ONLY — THE CHEAPEST SHIELD IN THE GAME
One last term, and this is the one that saves accounts. Reduce-only — a checkbox on every order that means this order can only shrink a position, never grow one.
You go to close a long, your hand slips, you hit buy instead of sell. Reduce-only refuses. It will not add to the position; it just declines. Run it on every exit until it is muscle memory. It costs nothing, and one day it is the difference between booking a trade and rekking your own position on a fat finger.
// THE ONE RULE
Now you speak the language. Spot and perp. Leverage and liquidation. Funding, the three prices, margin mode, the book, and the shield. That is the foundation, and most people sprint straight past it into the graveyard shift.
One rule before you move out: the leverage that makes the gain makes the grave. Survive first. Print second.
The three-part written primer that walks the same ground in more depth, start to finish.
// READ THE RISK DOCTRINE