Perpetual Contract
Also known as: perpetual swap, perp, perps, perpetual futures
What is it?
A perpetual contract is a leveraged derivative that tracks an asset's price but never expires, so a position stays open until you close it or it is liquidated. Every other futures contract has a settlement date that forces the contract price and the spot price together on that day. A perpetual has no such date, so it needs a different tether: the funding rate. Every few hours - eight hours on most venues - traders on the side that is pushing the contract away from spot pay the other side.
| Instrument | Does it expire? | What keeps it near spot | Can it be liquidated? | What you hold |
|---|---|---|---|---|
| Spot | No - nothing to expire | It is the spot price | No | The asset itself |
| Dated future | Yes - fixed settlement day | Expiry forces convergence | Yes | A contract you must roll |
| Perpetual contract | No - never settles | Funding paid every 8 hours | Yes | A contract with no roll |
When the perpetual trades above the index, longs pay shorts; when it trades below, shorts pay longs. That recurring payment is what keeps a contract with no expiry anchored to the asset it is supposed to track. What this changes for you is the shape of the cost and the shape of the risk. There is no roll to manage, which is why perpetuals carry most crypto derivative volume, but a position held for weeks pays funding the whole time, and that carrying cost is easy to underestimate against a slow-moving thesis.
The leverage is the sharper edge: a 10x perpetual position is liquidated by roughly a 9% move against you, and unlike a spot holding it cannot simply be waited out. Your capital is at risk and losses are amplified in both directions. See /risk-warning.
Why it matters: It never expires, so there is no roll date to force it back to spot - a recurring funding payment does that job, and it is charged the whole time you hold.
It sets both your carrying cost and your liquidation distance, so the same directional call plays out very differently on a perpetual than on spot.
Real-world example
A $50,000 BTC perpetual position at 10x leverage needs $5,000 of margin, is liquidated by roughly a 9% adverse move, and pays or receives funding every eight hours until you close it.
How SignalBots handles it
SignalBots crypto signals carry the entry, stop and target as price levels, so you can size a perpetual position to your own leverage and liquidation distance rather than to the signal's notional. See /risk-warning.
Pro tip
Before opening a perpetual, work out the percentage move that liquidates you at your chosen leverage and check it against the instrument's normal daily range.
Common pitfalls
Treating a perpetual as spot with a bigger position size, and so holding through a drawdown that a leveraged position gets liquidated in.
Frequently asked questions
Why does a perpetual contract never expire?
Because it was designed without a settlement date so traders never have to roll a position. The funding rate replaces expiry as the mechanism that keeps the contract price near the underlying index.
Is a perpetual the same as a futures contract?
It is a type of futures contract, but a dated future settles on a fixed day and a perpetual does not. That single difference changes how the price is anchored, how you are charged to hold it, and whether you ever have to roll.
What does it cost to hold a perpetual position?
Trading fees on entry and exit, plus funding every few hours for as long as the position is open. Funding can be positive or negative, so it is sometimes paid to you, but on a long-held position it is a real and recurring cost.
How much leverage should I use on a perpetual?
There is no correct number, but the higher it is the smaller the move that closes your position: 10x liquidates on roughly a 9% move, 25x on roughly 3.6%. Size it against the instrument's normal volatility, not against the maximum the venue offers.
Can I lose more than my margin on a perpetual?
On most major venues the liquidation engine closes the position before the account goes negative, and many offer negative-balance protection. You should still expect to lose the full margin on a liquidation, and your capital is at risk. See /risk-warning.
Trading involves substantial risk of loss. Historical and backtested results do not guarantee future performance. Read the full risk warning.
