Start with the basics
What is perps trading?
A simple guide to what you trade, where the price comes from and how it compares with futures.
What are perps?
“Perps” is short for perpetual futures. You trade a contract that follows an asset’s price, such as Bitcoin, without buying or owning the asset itself.
Unlike futures with a set expiry date, a perpetual contract has no scheduled expiry. You can keep a position open while you meet the venue’s margin requirements and any funding payments.
Go long
You benefit if the contract price rises and lose if it falls.
Go short
You benefit if the contract price falls and lose if it rises.
A simple example
You open a $10000 long position. If its price rises 2%, your trading profit is approximately $200. If it falls 2%, your trading loss is approximately $200, before fees and funding.
The $10000 is your market exposure. The deposit needed to open it is called margin. Leverage lets you use a smaller deposit, so a small market move can have a large effect on your account.
Where does the price come from?
A perp trades on a venue with its own buyers, sellers and liquidity. Its price can differ from the same asset on another exchange, or from a CME futures contract. There is no single trading price shared by every venue.
On an order-book exchange, orders from traders and market makers form the buy and sell quotes. A market maker is a participant that offers prices on both sides. Running the exchange does not automatically mean the exchange itself is your market maker.
Why do I see different prices?
- Last price
- The price of the most recent trade on that market.
- Mid price
- The halfway point between the best buy quote (bid) and best sell quote (ask). It is a reference, not a guaranteed fill price.
- Index or oracle price
- A reference for the underlying asset, often based on prices from other markets. The source depends on the contract.
- Mark price
- A calculated reference used by the venue for things such as unrealised profit, margin checks and liquidation. It can differ from the last or mid price.
If the best bid is $100 and the best ask is $102, the mid price is $101. A small market buy would normally start at the $102 ask, not the $101 mid.
Check which price triggers your stop. Also check which venue supplies your prop firm’s prices and whether your account is live or simulated.
What keeps the perp price close to the asset?
Funding helps keep the perp price close to its reference price. At scheduled intervals, one side of the market may pay the other. You may pay or receive funding while a trade stays open. This is separate from the fee for buying or selling.
Futures vs perps
Both let you trade price movements. These are the main differences between traditional dated futures and perpetuals.
| Feature | Dated futures | Perpetuals |
|---|---|---|
| Contract life | A defined expiry; roll if needed. | Generally no fixed expiry. |
| Position sizing | Whole contracts with set multipliers. | Often fractional units or USD notional. |
| Holding costs | Commissions and exchange fees; carrying costs are reflected in pricing. | Trading fees and funding payments. |
| Trading hours | Exchange sessions and maintenance breaks. | Often 24/7; venue and market restrictions still apply. |
| Margin | Broker and exchange requirements. | Venue margin rules and liquidation thresholds. |
A little more detail
Once the basics are clear, explore sizing, costs and the rules that affect a trade.
01 / Position value and margin
A $100,000 position is $100,000 of market exposure. At 10× leverage, its initial margin would be approximately $10,000 before venue-specific requirements. Your stop risk depends on position value and price movement. Changing leverage changes the margin requirement; it does not change the P&L for the same position size.
02 / Funding and fees
Funding is a periodic payment between long and short positions. Its direction and timing depend on the venue. Trading fees commonly apply to the full position value on each fill. At 0.04% per side, a $100,000 position costs $40 to enter and $40 to exit before funding or slippage.
Compare the full round-trip cost and expected holding time. Check maker versus taker rates and whether your prop plan adds its own charges.
03 / Stops and liquidation
A stop is an instruction to close a trade under specified conditions. Liquidation is the venue’s process when your collateral no longer supports the position. A stop can slip or fail to fill at your intended price. Check whether the venue triggers stops and liquidation from the mark price, last price or another reference.
04 / Why futures still make sense
Listed futures offer standardised contract specifications, a familiar contract-based sizing system and exchange-defined sessions. Traders may prefer that structure and their existing broker or platform. Perps offer a different sizing and market-access experience. Choose based on the markets, costs and execution you need.
05 / Before your first perp trade
- Confirm the exact market, contract multiplier and settlement currency.
- Check eligibility, account rules and whether trading is simulated or live.
- Read margin, funding, fee and liquidation rules.
- Check order types and which price triggers your stop.
- Calculate your position size and test execution with a small trade.
06 / Why account size can be misleading
A “$100,000 account” with a $3,000 static loss limit gives you a $3,000 loss allowance. Comparing the headline account size against its fee misses that constraint. Drawdown per dollar of fee is a useful starting metric, but targets, daily limits, payout rules and firm reliability also matter.
Reference reading: What perpetuals are · How an order book works · Mark and oracle prices · CME NQ specifications · Coinbase perpetuals terms · Coinbase liquidation guide. Venue rules differ.