How Perpetual Futures Work
Follow a perpetual position from its reference market and price indexes through margin, funding, PnL, closing and liquidation.
Read the articlePerpetual Futures Basics
Learn the essential mechanics of perpetual futures, including market tracking, long and short positions, margin, funding, pricing and liquidation.
On this page
Start With How the Contract Works
The Foundations to Understand
- Market tracking
- A perpetual has its own market but follows a defined reference through price and funding mechanisms.
- Long and short exposure
- Direction and position size determine gross PnL; the contract does not normally transfer ownership of the underlying asset.
- Margin and leverage
- Margin supports the position. Leverage changes how much notional that margin controls and how quickly losses can threaten it.
- Funding and price references
- Funding, last price, index price and mark price have separate jobs and should not be treated as interchangeable.
- Closing and liquidation
- A position can be reduced or closed by choice; it may also be liquidated if venue maintenance requirements are no longer met.
A Sensible Learning Order
- Understand how the contract follows its market.
- Understand position size and margin.
- Understand funding and price references.
- Understand PnL and liquidation.
- Only then study execution and strategies.