Crypto markets never sleep or settle, and price fluctuations can happen anytime. While spot trading lets users buy and hold assets directly, many traders want more flexibility, especially the ability to trade both up and down movements of the markets.
That’s where perpetual contracts, also known as perpetual futures, come in. These contracts allow the user to trade crypto without owning the token itself. Unlike traditional futures, there’s no expiry date.
This guide breaks down how perpetual futures work and how beginners can trade them without risk.
Perpetual contracts are a form of crypto derivative that allows users to trade on the price of an asset without actually buying or owning it. The user can enter a trade depending on whether they think the price will go up (long) or down (short).
The main difference between the two is that perpetual futures contracts have no expiration date. This means that the user can keep a trade open as long as they have enough margin.
The traditional futures contract has an expiry date. The traders are required to close the contract or roll over the contract when the expiry date is near.
The perpetual contract doesn’t have this problem. As there is no expiry date, the perpetual contract uses a system called the funding rate to keep the price of the perpetual contract close to the spot price.
In spot trading, users can simply buy Bitcoin or Ethereum and sell it when the price rises.
But in perpetual contracts, users do not actually own the asset. They need to trade on the price exposure, which means they can make profits even when the price falls by going short.
However, leverage also carries a risk of liquidation, which spot traders do not have.
| Feature | Spot Trading | Perpetual Contracts |
| Own the asset? | Yes | No |
| Expiry date? | No | No |
| Leverage available? | Rare | Yes |
| Liquidation risk? | No | Yes |
Understanding how perpetual contracts work is important before placing a trade.
As mentioned, Perpetual contracts have no expiration dates. Exchanges employ a funding rate to keep the contract price close to the spot price. A positive funding rate indicates that longs pay off shorts, and a negative funding rate means that shorts pay off longs.
For instance, a ₹1,00,000 contract with a 0.01% funding rate will cost ₹100 per interval. Funding rates also indicate market sentiment. A high positive funding rate indicates that there is bullish overcrowding in the market, and a negative funding rate indicates bearish pressure.
| Price Type | Meaning | Importance |
| Last Price | Last trade price | Shows the current market price |
| Index Price | Average of major exchange prices | Gives fair market reference |
| Mark Price | Used for liquidation | Prevents sudden unfair liquidations |
Perpetual futures allow leverage, controlling a larger position with a smaller deposit.
Position Size = Margin × Leverage
Leverage amplifies gains and losses. If losses reduce the user’s margin below the maintenance level, the exchange closes their trade; this is liquidation.
Leverage vs Margin vs Position Size
| Leverage | Margin Deposited | Position Size |
| 2× | ₹10,000 | ₹20,000 |
| 5× | ₹10,000 | ₹50,000 |
| 10× | ₹10,000 | ₹1,00,000 |
Lower leverage gives more room, while higher leverage increases liquidation risk.
Suppose a user opens a BTC perpetual trade with a ₹10,000 margin at 5x leverage, giving a ₹50,000 position. If Bitcoin rises 2%, their profit is ₹1,000 (10% of margin). If it drops 2%, they will lose ₹1,000.
Funding fees add extra cost if held across intervals. To sanity-check your exposure in rupees, use the BTC to INR converter.
Trading perps is easier with a clear process:
Perpetual futures trading becomes much easier once one sticks to simple, proven strategies rather than overtrading. Beginners will often start with trend-following, range setups when the market is sideways, or hedging spot holdings during downturns.
Traders also watch funding rates to avoid extra costs, while advanced users may explore arbitrage opportunities between spot and futures prices.
Key perpetual futures strategies include:
Beginners begin with trend following, trading in the market direction. Others employ range trading, buying at support and selling at resistance with tight stop-losses.
Perps can be used to hedge spot positions, for instance, a small short position to hedge against the downside. More complex strategies include funding rate positioning and spot perp arbitrage.
As Perpetual futures carry higher risk than spot trading. Liquidation is the main danger, especially with high leverage.
Other risks: volatility, slippage, funding costs over time, and overtrading.
Beginner risk playbook:
For Indian traders, futures trading may include conversion friction and stablecoin management. INR-margin futures allow traders to manage position size in rupees, making risk management easier to understand.
The mechanics are the same funding rates, leverage, and liquidation. Check the Bitcoin value in INR before trading for better position sizing.
Practice INR Futures on Mudrex to start small and learn safely.
Perpetual contracts give traders the flexibility to speculate on crypto prices without worrying about expiry dates. However, the use of leverage significantly increases liquidation risk, making it essential to fully understand how these contracts work before trading.
If you are just getting started, begin with small positions, use conservative leverage, and prioritise risk management over short-term gains. A disciplined approach can help you navigate perpetual trading more safely and effectively.
To trade crypto derivatives with clarity and built-in risk controls, download the Mudrex app. For practical tutorials, market insights, and beginner-friendly explainers, subscribe to the Mudrex YouTube channel and stay updated with the latest in crypto trading.
Pick a pair, set margin and leverage, place stop-loss, and manage liquidation carefully.
It can be, but success depends on discipline and risk management.
A heuristic suggesting most capital should stay safe, with only a small portion used for leveraged trades.
Trend-following, hedging, and funding-aware positioning.
Indefinitely, but funding fees increase holding costs.
Close the position using market or limit orders.
Yes, leverage increases liquidation risk compared to spot trading.
