Perpetual Futures
A futures contract with no expiry date. Because it never settles, it needs a mechanism to stay tethered to spot, which is funding. That single design decision is the source of nearly every quirk in perp trading.
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How perps actually hold their price.
Perpetual futures are the dominant instrument in crypto trading, and most of their behaviour comes from mechanics that spot traders never encounter: funding payments, mark pricing and forced liquidation.
Understanding these is less about theory than survival. Most leveraged accounts are not lost to bad analysis but to misunderstanding how the contract itself works.
Funding-Rate Modeling
Funding is a periodic payment between longs and shorts, usually every eight hours, sized by how far the perp trades from spot. Modelling it matters for any position held more than a day, because the cumulative payment can exceed the price move you were trying to capture.
Futures Basis
The difference between the futures price and the spot price. A positive basis means futures trade above spot, usually a sign of leveraged long demand. Basis is the raw material of cash-and-carry trades, where you capture the spread while hedging direction.
Term Structure
How basis varies across expiry dates. Contango, where further-dated contracts are more expensive, is the normal state. Backwardation, where they are cheaper, indicates stress or aggressive short demand and is worth noticing when it appears.
Mark and Index Prices
The index price is a composite of spot prices across several exchanges. The mark price is derived from it and is what your liquidation is calculated against, not the last traded price on your venue. This exists so a brief wick on one exchange cannot liquidate positions market-wide, and it is why you can be liquidated at a price you never saw print.
Liquidation Risk
The point at which your margin no longer supports your position and the exchange closes it at market. It is a function of leverage, maintenance margin and the mark price. The practical consequence is that leverage does not just amplify returns, it sets the distance the market must travel to remove you from the trade entirely.
Liquid Edge
What Liquid Edge does about it
Perp mechanics are enforced by the exchange, not by us. What the platform can do is make sure your strategy accounts for them rather than discovering them the hard way.
- Position and exposure limits are validated before an order is routed, so leverage stays where you set it
- Stops execute on the engine, which matters most in exactly the fast conditions that cause liquidations
- Funding is a real cost on any held perp position, so it belongs in the strategy that holds one
Liquid Edge
Run perp strategies on your own account.
Paper trade it first, go live when the numbers convince you.
- Perpetual Futures
- Funding-Rate Modeling
- Futures Basis