What Are Perpetual Futures? A Plain-English Guide

Buying bitcoin on a spot market normally means buying bitcoin under that market’s settlement rules. Buying a bitcoin perp instead gives you a contract whose result depends on bitcoin-related prices. You do not automatically receive a coin you can send to another wallet. Similarly, a stock-price perp is not a company share with ordinary shareholder rights.

The asset or price reference the contract follows is called the underlying. The contract specification defines units, settlement currency and the gain/loss formula. Some products are linear and settle results in a dollar-like currency; inverse products can use different math. A familiar market name does not tell you which formula applies.

A long benefits from a higher exit price, before costs. A short benefits from a lower exit price. Neither direction is safer simply because it is easier to describe. A rising price hurts a short; a falling price hurts a long. Both require an exit plan and enough supporting collateral.

For a hypothetical simple linear BTC perp, 0.1 BTC entered at $60,000 has $6,000 of notional exposure. If a long closes at $63,000, gross price profit is 0.1 × $3,000 = $300. If it closes at $57,000, gross price loss is $300. A short reverses those results. Trading fees and funding change the final net number.

A traditional dated future eventually reaches a specified settlement. A perp normally removes that scheduled end date. But the venue can still close or reduce a position when margin requirements are not met. Product suspension, market hours, maintenance or account restrictions can also affect access.

Many perps use funding payments to encourage their price toward a reference market. Under the common convention, positive funding means longs pay shorts and negative funding means shorts pay longs. The formula and timing vary. The payment encourages alignment; it does not force perp and spot prices to be identical every second.

Notional is the approximate market value a position controls. Margin is collateral supporting that position. In a simplified example, $6,000 exposure backed by $600 margin is 10x position leverage. A 1% adverse price move causes about a $60 gross loss, which is 10% of that margin. The exposure sets the dollar price effect; the smaller deposit magnifies its percentage impact.

Liquidation does not normally wait for the entire margin to disappear. Maintenance requirements, fees, funding and the price reference affect the threshold. The shortcut 1 divided by leverage is not an exact liquidation formula. The venue’s own risk method is the source of the real rule.

Last price is the latest contract trade. Index price is an underlying-market reference. Mark price is a venue-calculated reference often used for risk measurement. They can differ. Many venues use mark price for liquidation, while a stop may be configured to watch last, mark or index.

This matters when a chart candle appears to reach a level but an order does not trigger. First check the selected price reference, then order status and platform rules. A screenshot alone does not establish an execution failure. Actual fills—not just the displayed quote—determine trading results under the contract.

Check legal availability for your location and the exact instrument. A reachable offshore website is not permission to use its derivatives. Do not use a false address, VPN workaround or borrowed identity to evade restrictions. For US users, verify current product and intermediary information rather than assuming a general registration category authorizes a specific perp.

Then learn the order routine in a demo. An order can be unfilled or partially filled; canceling it does not necessarily close the filled position. A normal sell larger than an existing long can reverse into a short in a one-way account. Where supported, reduce-only can help prevent that mistake, but you still must check the resulting position.

Do not make leverage selection the goal of your first session. Make correct explanation and operation the goal. If you can calculate a loss, distinguish exposure from margin and close a demo position cleanly, you have learned more than someone who merely picked a winning direction once.

The Perp Master Class develops these topics with worked examples and practice labs. A completed lesson or quiz is a learning milestone, not a license, suitability assessment or guarantee of profit.