Perpetual contracts are a type of derivative product settled in digital assets. Traders can either buy long (expecting price appreciation) or sell short (expecting price depreciation) to profit from market movements. Unlike traditional futures, these contracts have no expiration or settlement date, allowing positions to remain open indefinitely.
This guide provides a foundational overview of how perpetual contracts function and the general process for engaging with them on trading platforms, covering both application (APP) and web-based interfaces.
Core Concepts: Inverse vs. Linear Contracts
Before starting, it's crucial to understand the two primary types of perpetual contracts, which differ in their collateral and settlement currencies.
- Inverse Contracts (Coin-Margined): These are quoted and settled in USD, but the collateral used for margin and the calculation of profit and loss (PnL) are both in the base cryptocurrency (e.g., BTC, ETH). To trade a BTC inverse contract, you must hold BTC.
- Linear Contracts (USDT-Margined): These are quoted, collateralized, and settled in USDT. Holding USDT allows you to trade contracts for various cryptocurrencies, with all profits and losses calculated in USDT.
Getting Started on the App
The initial setup process is vital for managing risk and executing trades effectively.
Transferring Funds
To begin trading, you must first transfer the required collateral from your funding account to your trading account.
- Navigate to the ‘Assets’ tab.
- Select ‘Transfer’.
- Choose the currency (e.g., USDT).
- Select ‘Funding Account’ as the source and ‘Trading Account’ as the destination.
- Enter the amount and confirm the transfer.
Configuring Account Settings
Properly configuring your account helps tailor the trading experience to your strategy.
- Tap the icon in the top left corner of the trading interface.
- Select ‘Account Information’ and then ‘Trading Settings’.
- Here, you can select your desired ‘Account Mode’ and ‘Trading Unit’ (which can be coins, contracts, or USDT for linear contracts).
Executing a Long Position (Buying)
A long position is entered when you anticipate the market price of an asset will rise.
Opening a Long (Buy/Long)
This example uses a BTCUSDT perpetual contract.
- On the ‘Trade’ page, select the BTC/USDT pair.
- Switch the trading mode to ‘Perpetual’ and ensure ‘USDT Contract’ is selected.
- Choose the BTCUSDT perpetual contract.
- Select ‘Cross’ or ‘Isolated’ margin, choose your leverage, and set the order type to ‘Limit Order’.
- Input your desired price and quantity.
- Click ‘Buy/Long’ and confirm the order.
Key Considerations:
- Cross vs. Isolated Margin: Cross-margin uses your entire available balance to prevent liquidation, while isolated margin limits risk to the funds allocated to that specific position.
- Leverage: Higher leverage amplifies both potential gains and losses. Use it cautiously.
- Order Confirmation: Many platforms offer a double-confirmation feature where you can set take-profit and stop-loss orders at the moment of opening a position to manage risk immediately.
- Balance: Ensure you have sufficient collateral; adjust leverage or transfer more funds if needed.
Closing a Long (Sell/Close Long)
You can close a position from two main areas: the main trading interface or your positions page.
- Trading Page: Click ‘Close’, choose ‘Limit Order’, enter the price and quantity, and click ‘Sell/Close Long’.
- Positions Page: Navigate to ‘Positions’, find the specific long position, click ‘Close’, enter your price (or select ‘Market’ price), specify the quantity, and execute the close.
You can also set take-profit/stop-loss orders to automatically close positions at predefined price levels, helping to lock in gains or cap losses. For instant closure, most platforms offer a ‘Market Close All’ button, though this is subject to market liquidity.
Monitoring Your Position and Orders
After opening a position, monitor key metrics in the ‘Positions’ tab:
- Average Entry Price: The weighted average price at which your position was opened.
- Mark Price: The index price used to calculate unrealized PnL and avoid liquidation from market manipulation.
- Liquidation Price & Margin Ratio: The estimated price where your position may be liquidated. Always monitor the Margin Ratio; a ratio at or below 100% triggers liquidation.
Check open orders under ‘Current Orders’ where you can also cancel any pending limit orders.
Executing a Short Position (Selling)
A short position is entered when you anticipate the market price will fall.
Opening a Short (Sell/Short)
The process mirrors opening a long.
- On the ‘Trade’ page, select the desired perpetual contract (e.g., BTCUSDT).
- Choose ‘Limit Order’, enter your price and quantity.
- Click ‘Sell/Short’ and confirm.
Closing a Short (Buy/Close Short)
Closing a short involves buying back the asset.
- Trading Page: Click ‘Close’, choose ‘Limit Order’, enter the price and quantity, and click ‘Buy/Close Short’.
- Positions Page: Find the short position in your list, click ‘Close’, enter the details, and confirm.
As with long positions, utilize take-profit/stop-loss orders and the ‘Market Close All’ feature for efficient risk management.
Getting Started on the Web Platform
The web platform offers a similar workflow with a desktop-optimized interface.
Transferring Funds
- Click ‘Assets’ in the top right corner.
- Select ‘Transfer’.
- Choose the currency, transfer from ‘Funding Account’ to ‘Trading Account’, enter the amount, and confirm.
Configuring Account Settings
- Click ‘Trade’ on the top left of the homepage and select ‘Trading’.
- In the trading view, click the settings icon (often a gear) in the top right.
- Configure your ‘Account Mode’ and ‘Trading Unit’.
Placing Trades on Web
The process for entering and exiting long (Buy/Long, Sell/Close Long) and short (Sell/Short, Buy/Close Short) positions is functionally identical to the app. The main difference is the layout and navigation, which is designed for a larger screen. You can still set limit/market orders, adjust leverage, and use cross or isolated margin. All position monitoring and order management features are also available.
👉 Explore more advanced trading strategies
Frequently Asked Questions
What is the main difference between cross and isolated margin?
Cross-margin uses your entire account balance as collateral for all open positions, potentially preventing liquidation on one trade with equity from another. Isolated margin restricts the collateral and risk to the funds allocated to a single position, protecting the rest of your capital.
Can I change my margin mode after opening a position?
This depends on the platform's specific rules. Some allow it, while others may require you to close the existing position and open a new one under the desired margin mode. Always check the platform's help section for its current policy.
Why is the mark price used instead of the last traded price?
The mark price, derived from an average across major spot markets, prevents forced liquidations caused by short-term market manipulation or illiquidity on the derivatives exchange itself, creating a fairer trading environment.
What happens if my stop-loss order is not executed?
In extremely volatile market conditions, a price gap can occur. If the market price jumps past your stop-loss trigger price, the order may be executed at a worse price (slippage) or, in worst-case scenarios, not filled until the price reaches the liquidation point.
Is high leverage recommended for beginners?
Absolutely not. High leverage significantly increases risk. Beginners should start with low leverage (e.g., 5x-10x) to understand how contract trading works and how price movements affect their equity before considering higher levels.
Do I need to own Bitcoin to trade BTC perpetual contracts?
It depends on the contract type. For a USDT-margined (linear) contract, you only need USDT as collateral. For a coin-margined (inverse) BTC contract, you must use BTC as your collateral.