What Are Perpetual Futures?
Perpetual futures are derivative contracts that allow traders to speculate on the price of an asset without an expiration date. Unlike traditional futures, perpetual contracts never settle, making them ideal for continuous exposure to market movements.
How Funding Rates Work
The funding rate mechanism keeps perpetual contract prices aligned with the spot market. When the perpetual price trades above spot, longs pay shorts. When it trades below, shorts pay longs. This creates a natural equilibrium.
Managing Risk
Proper risk management is essential when trading with leverage. Always use stop-losses, never risk more than you can afford to lose, and start with lower leverage until you understand the mechanics.
Key Risk Management Rules
- Never risk more than 2% of your portfolio on a single trade
- Use stop-losses on every position
- Understand liquidation prices before entering trades
- Start with low leverage (2-5x) as a beginner
