Perpetual contracts: what they are and how they work

Perpetual contracts: what are they in simple words?

A perpetual contract, also called a perpetual future or perp, is a derivative on the price of a coin, bitcoin for example. You don't buy the coin: you open a position that gains or loses depending on how its price moves. The word that sets them apart is "perpetual": unlike a traditional future it has no expiry date, so you can keep it open for an hour or a month, as long as your margin holds and until you decide to close it.

They were born on crypto platforms, which work twenty-four hours a day, and today they are the most traded instrument among cryptocurrency derivatives. The more popular an instrument is, the more it pays to understand it before touching it, because its convenience hides a few mechanisms that do damage on beginners' accounts.

How is a perpetual contract different from a future with an expiry?

A classic future says: in three months I will buy or sell at this price. At expiry the contract closes and, if you want to stay in the market, you have to open a new one, that is, do the "rollover". The perpetual skips the problem: it never expires. The contract's price, however, is not tied to a date that forces it back close to spot. Another mechanism is needed, and that is funding.

How does the perpetual's price stay close to spot?

With the funding rate, a periodic payment between those who are long and those who are short. If the contract trades above spot, because too many people are buying, longs pay and shorts receive. If it trades below, the opposite happens. The payment does not go to the platform: it passes from one side of the market to the other, and it is exactly this small cost or income that pushes positions back into balance.

For you this means something practical: keeping a position open has a cost that can change, even when the price doesn't move. On a position held for a few hours the bill is negligible, on one held for weeks with high funding it can weigh.

How do margin and leverage work on a perpetual?

To open the position you deposit a part of its value, the margin, and the platform lends you the rest. How big the loan is depends on the leverage. An illustrative example, with made-up numbers and not an STA result: with 100 of margin and 5x leverage you control a position of 500. If the price rises by 2% you gain 10, which is 10% of your margin. If it falls by 2% you lose 10, in the same proportion.

1. You deposit the margin. It is the amount you put at risk on that position.
2. You choose the leverage. The higher it is, the smaller the move that hurts you.
3. You choose the direction. Long if you think it will rise, short if you think it will fall, as explained in long and short.
4. You set the stop. It is the level at which you accept to exit, and it is best to decide it before entering.

What happens if the price goes against you? Liquidation

When the loss eats up almost all of the margin, the platform closes the position to protect itself. This is the liquidation, and with high leverage it arrives on small moves. That is why, on a perpetual, the stop is not a detail: it has to sit before the liquidation level, not after it.

What are the risks of perpetual contracts?

These are real risks, and they are worth listing plainly.

• Leverage amplifies losses as much as gains, and you can lose the entire margin of the position.
• Funding can change and has to be paid as long as the position is open.
• Crypto prices move at night and on weekends, when you are not watching the screen.
• In many countries crypto derivatives have specific rules and restrictions: availability depends on where you live and on the platform.
• Regulated brokers of leveraged derivatives must disclose that a high share of retail accounts lose money: read that number on the page of the platform you use, it is the most honest figure you will find.

How do you read a perpetual before opening it?

There is no magic indicator, but there are three things you always look at. Funding tells you how much it costs to be on one side and how crowded that side is. The open interest tells you how many positions are open in total. Finally, the liquidation level tells you how much room the price has before it pushes you out. Read together, they don't tell you where the price will go, they tell you under what conditions you are entering.

Can you try a perpetual contract without risking real money?

Yes, and it is the way I suggest to anyone starting from zero. A demo account with real prices shows you how margin, funding and stop move on a position, with play money. The big picture, from the basics to the costs, is in the guide to mindful online trading.

Where STA fits in

The markets STA works on, the OKX derivatives, are built on exactly these instruments, and among the data the agents read before every analysis there is derivatives data, funding included. How they weigh it is part of the method we don't share. Ten artificial intelligence agents analyze the markets twice a day, with a debate between a Bull and a Bear, every card has its stop, and your funds stay on your OKX account.

The DEMO is free forever, with real prices and the same cards as REAL. You need an account. During the launch phase, which began on 16 October 2026, STA's fees are temporarily disabled, even in REAL; the ordinary price list, suspended while the launch lasts, is 18% of the positive net result of each day, with no offsetting of losses. The history of the cards, losses included, is public on GitHub.

Frequently asked questions

This article is for information only and is not investment advice. Trading crypto-assets involves a high risk, including the total loss of the capital used. Numerical examples are for illustration.