Perpetual Futures FAQ and Key Concepts

What are perpetual futures?

Perpetual futures are derivative contracts that let traders speculate on an asset’s price without an expiration date. Unlike traditional futures contracts, perpetual futures remain open indefinitely and use funding payments to keep prices aligned with the underlying spot market.

How do perpetual futures differ from traditional futures?

The primary difference is that perpetual futures never expire. Traditional futures settle on a specific date, while perpetual contracts stay open until the trader closes the position or it is liquidated. This makes perpetual futures particularly popular among active crypto traders.

What is a funding rate?

Funding rates are periodic payments exchanged between long and short traders. They help keep perpetual futures prices close to the underlying spot market. Depending on market conditions, traders may either pay or receive funding.

Why do traders use perpetual futures?

Many traders choose perpetual futures because they offer continuous market exposure, support both long and short positions, and provide access to leverage. They are commonly used for speculation, hedging, and short-term trading strategies.

What are the risks of perpetual futures?

Perpetual futures can be highly volatile, especially when leverage is involved. Traders should understand margin requirements, liquidation risk, funding costs, and the mechanics of each exchange before opening a position.

What assets can be traded as perpetual futures?

Bitcoin and Ethereum are the most actively traded perpetual futures markets, but many exchanges also offer contracts on hundreds of altcoins and, in some cases, other asset classes.

Are perpetual futures suitable for beginners?

Perpetual futures are generally best suited for traders who understand leverage, derivatives, and risk management. Beginners may benefit from learning the mechanics of futures markets before trading with real capital.