If you want to trade in the crypto market, “perpetual contracts” are almost an unavoidable keyword. For most traders, lack of capital is always the biggest obstacle to market participation. Therefore, the Perpetual Contract is not only a derivative tool, but also a primary way to leverage capital and amplify returns. As a result, whether it’s an established exchange or an emerging platform, perpetual contracts have become one of the core businesses.

At the same time, perpetual contracts are also highly controversial due to their high leverage, complex mechanisms, and risk management challenges — like a double-edged sword: on the one hand, they allow traders to use limited funds to capture bigger market opportunities; on the other hand, excessive leverage or neglect of risk control can lead to painful outcomes like instant liquidation and funds going to zero. Therefore, truly understanding the mechanisms and risks of perpetual contracts, and combining them with scientifically designed trading strategies, is the key to determining whether you can remain undefeated in this market.

This article will take you from basic concepts to deeper logic, comprehensively dissecting the operating mechanisms, trading logic, risk points, and industry significance of perpetual contracts. We will also combine SuperEx’s practical cases to help readers better understand the positioning and value of this product in the crypto market.

https://news.superex.com/articles/613.html

A perpetual contract is a contract with no expiration date. In traditional finance, futures contracts have fixed delivery dates — such as one month, three months, or one year — but in the crypto market, perpetual contracts can be held indefinitely until the trader closes the position voluntarily.

Their key differences from traditional futures lie in:

• No expiration/delivery: you don’t have to worry about contract expiry and can hold positions for a long time based on the market.

• Funding rate mechanism: periodic settlement ensures that contract prices remain relatively aligned with spot market prices.

• High leverage: most exchanges allow 10x, 20x, or even 100x leverage, which makes perpetual contracts full of opportunities but also hidden risks.

The history of contract trading is very long. From the first futures contract in the United States in 1848 to today, there have been 174 years of history. From a fundamental perspective, the essence of a contract is a delivery agreement: it stipulates that on a future date, the buyer and seller deliver at a specified price. When financial leverage is added to this agreement, it becomes highly favored by the market.

Contract trading in the crypto market first appeared in 2013. Evolving from traditional financial contract trading, it began localized development. Based on the original delivery agreement and combined with the crypto market’s T+0 two-way trading rule, a new agreement was derived: the perpetual contract.

Perpetual contracts were first proposed by BitMEX in 2016 and were considered a bold innovation at the time. As the name implies, a perpetual contract never expires — so long as you are not liquidated, you can hold it indefinitely. In addition, perpetual contracts introduced the concept of a spot price index and, via associated mechanisms, pull the perpetual price back toward the spot index price. Therefore, unlike traditional futures, the perpetual contract price will not deviate much from the spot price most of the time. Compared with traditional futures contracts, this is a big step forward.

Today, it has become one of the most popular derivative tools in the global crypto market. According to multiple research institutions, perpetual contract volume has long accounted for more than 70% of the entire crypto derivatives market.

To truly understand perpetual contracts, you must grasp several key mechanisms:

Leverage allows you to use less capital to control larger contract value. For example:

• Account funds: 1000 USDT

• Use 10x leverage

• Open position value: 10,000 USDT：This means that if price rises 10%, in theory you can earn 100% return. Conversely, a 10% drop can also liquidate you.

• Initial margin: the minimum capital required to open a position.

• Maintenance margin: your account funds must be above a certain ratio to avoid forced liquidation.

• Forced liquidation (liquidation): when funds are insufficient to cover losses, the system automatically closes the position to prevent greater risk.

This is the most distinctive mechanism of perpetual contracts.

• When the contract price is above the spot price, longs pay funding to shorts.

• When the contract price is below the spot price, shorts pay funding to longs.This design ensures the contract price will not significantly deviate from the spot price over the long term.

To avoid unfair liquidations caused by market manipulation, exchanges use the mark price — rather than the last traded price — to calculate PnL. This mechanism is strictly enforced on SuperEx as well.

• No expiration, flexible operation: traders don’t need to consider delivery dates and can hold positions long-term.

• Freedom to go long or short: you can profit in both rising and falling markets.

• Leverage amplifies returns: small capital can also capture big moves.

• Strong liquidity: on leading exchanges like SuperEx, mainstream perpetuals have ample depth and low slippage.

• Funding rate arbitrage: some professional traders even achieve stable returns via funding rate differentials.、

However, perpetuals are not a guaranteed-profit game. The risks they hide can be even higher than in the spot market.

Leverage is a double-edged sword. Even slight market fluctuations can trigger liquidation. Statistics show that most beginner losses come from over-leveraging.

Because contracts can be opened and closed at any time, many people fall into the trap of frequent trading. Short-term battles often make retail traders vulnerable to emotional swings.

Although the rate itself isn’t high, long-term holding can see profits eroded by funding. Especially in extreme markets, funding can spike abnormally high.

Risk controls differ across exchanges. If platform risk control is insufficient, negative-equity positions and liquidation disputes can occur. Therefore, choosing a compliant and secure platform is crucial.

• Margin: margin is used to cover losses caused by bankrupt users’ negative-equity positions, ensuring profitable users are not affected.

• Cross margin: all positions in the account share margin, and PnL across positions can offset one another.

• Cross margin collateral: uses all available account balance as margin to avoid forced liquidation. Any realized profits from other positions can help add margin to a losing position.

• Isolated margin: each position’s risk and return are independent; margin and PnL are accounted for separately per position.

• Isolated margin collateral: the maximum loss of an isolated position is limited to the initial margin plus any added margin for that position. If forced liquidation occurs, the user only loses the isolated position’s margin; the account’s available balance will not be tapped. By isolating the margin used for a given position, you can cap the loss at the initial margin, which helps when your short-term speculative strategy fails.

• Sub-account (segregated account): in a sub-account mode, a certain amount of margin must be transferred into a designated account. If the margin ratio ≤ 0, the position will be forcibly liquidated, and the trader may lose all the margin under that account.

• Long: first buy the contract at an appropriate price and then sell later after the price rises to earn the spread — commonly called “buy first, sell later.”

• Short: first sell the contract at an appropriate price and then buy back after the price falls to earn the spread — commonly called “sell first, buy later.”

• Maker: placing a resting order — submitting an order with specified price and quantity and waiting for others to trade against it.[Placing a certain quantity of orders at book prices to immediately execute against resting orders on the order book.]

• Mark price: an assessment of the fair price of the perpetual contract. Its main role is to calculate unrealized PnL and serve as the basis for forced liquidation.

• PnL: PnL can be divided into realized and unrealized. If you still hold a position, the PnL of that position is unrealized and fluctuates with the market. Conversely, the PnL after closing is realized, because the closing price is the transaction price in the contract market; therefore realized PnL has nothing to do with the mark price. Unrealized PnL is calculated using the mark price, and it is usually unrealized losses that lead to forced liquidation.

Compared with traditional futures, the biggest advantage of the Perpetual Swap is the lack of a delivery date, making it suitable for mid- to long-term strategy trading. Compared with simple “buy up or buy down,” reasonable use of strategies can help traders improve win rates, control risk, and achieve stable returns. We will discuss strategies from the following five common perspectives:

Trend following is the most common strategy for perpetuals. Its core idea is “once a trend forms, it often persists,” so traders follow the market direction and establish long or short positions.

In practice, investors often use technical indicators to confirm trends. For example, use moving averages (MA) to observe whether price is running above long-term MAs; use Donchian Channels or Bollinger Bands to identify breakouts. If BTC breaks a key resistance accompanied by rising volume, then establishing a long position in the perpetual market is following the trend.

The advantage of trend following is that it’s easy to understand and very effective in one-sided bull or bear markets. The downside is that in choppy markets, it’s easy to be stopped out by “false breakouts.” Therefore, trend following often needs to be combined with position control and take-profit/stop-loss mechanisms to keep losses within acceptable ranges when conditions are unfavorable.

In short, trend following does not aim to capture every wiggle, but to take the main portion of a trend.

There is a unique connection between perpetuals and spot — the funding rate. It’s a mechanism designed to keep the contract price close to the spot price.

When the funding rate is positive, longs pay shorts; when negative, the opposite. This provides opportunities for arbitrageurs. For example, when market sentiment is extremely bullish, funding may be very high. An arbitrageur can buy the underlying asset in the spot market while opening a short in the perpetual market, thereby locking in an almost risk-free return.

In addition, cross-exchange arbitrage is also common. At times, different platforms will price the same asset’s perpetuals differently. Arbitrageurs can buy on the cheaper platform and sell on the more expensive one to capture the spread.

The advantage of arbitrage strategies is relatively lower risk and non-dependency on market direction. The drawback is the large capital requirement, potentially low yields, and the need for real-time monitoring of market data and funding rates — otherwise, the best windows may be missed.

In the highly volatile crypto market, risk management is more important than return. Hedging is a core function of perpetuals, allowing investors to establish opposite positions to offset price risk.

Example: an investor who is long-term bullish on the Ethereum ecosystem may hold a large amount of ETH spot but worries about short-term downside. They can open a proportional short in perpetuals as a hedge. If ETH falls, the spot loss is partially offset by the short’s gain; if price rises, although the short loses, the spot gains more.

This operation is akin to insurance, helping investors “lock in” asset value and reduce emotional decision-making. Hedging is very common among miners, institutions, and long-term investors. For example, Bitcoin miners use perpetual shorts to hedge BTC they expect to mine in the coming months to mitigate downside risks.

Note that hedging does not eliminate risk; it only transfers or reduces it. Traders should choose the hedge ratio based on position size, risk tolerance, and capital management rules.

The 7×24 nature of perpetual markets is well-suited for quantitative and high-frequency strategies. Quant trading builds algorithmic models to exploit small market fluctuations repeatedly, aiming for long-term stable returns.

Common quantitative strategies include:

• Market-making: placing orders on both bid and ask to earn the spread;

• Statistical arbitrage: seeking mean-reversion opportunities based on historical data;

• Momentum trading: capturing short-term bursts;

• Grid trading: repeatedly buying low and selling high within a price range to harvest volatility.

Quant trading has a high entry barrier for individuals, requiring programming skills, historical backtesting, and strict risk control. But with exchange APIs and third-party quant platforms, retail users increasingly have access to quant tools. For example, platforms like SuperEx provide quant trading interfaces so users can configure automated strategies and reduce emotional interference.

The advantages of high-frequency and quant strategies are strong discipline and immunity to fear/greed in execution. The drawbacks are high requirements for systems, capital, and strategy optimization — and potential constraints from market liquidity and fee costs.

Contract copy trading, as the name implies, allows users in the futures market to avoid making their own judgments about trends; they simply select a trusted trader to “follow,” and the system automatically mirrors that trader’s actions, achieving truly “hands-off” trading.

• For beginners without trading experience, copy trading is a way to “borrow brains to make money.”

• For busy investors who cannot watch the market all day, copy trading offers a kind of “intelligent custody” experience.

• For traders with their own strategies who want to become star managers, copy trading is a new stage to showcase skills, gain followers, and share profits.

SuperEx’s “Contract Copy Trading” feature is fully live, supporting one-click replication of professional traders’ contract operations — enabling easy following, intelligent risk control, and stable returns. This function improves upon traditional copy-trading systems on the market, delivering comprehensive upgrades in user experience and profit-sharing mechanisms.

• For followers: low-threshold participation in the futures market and an easy-to-use contract-trading experience for everyone. SuperEx has built a broad avenue to “profit from volatility by following experts.”

• For lead traders: SuperEx provides a new channel for building IP and sharing revenue. Certified lead traders can obtain 10% of followers’ profits. In addition, SuperEx will later support manual configuration of follower ratios by lead traders.

SuperEx has set strict admission criteria for traders, allowing only operators with stable profitability and strong risk control to be publicly listed. All trading data is open and transparent, including historical returns, win rate, max drawdown, capital scale, follower returns, etc., helping users make informed decisions.

If you want to trade in the crypto market, “perpetual contracts” are almost an unavoidable keyword. For most traders, lack of capital is always the biggest obstacle to market participation. Therefore, the Perpetual Contract is not only a derivative tool, but also a primary way to leverage capital and amplify returns. As a result, whether it’s an established exchange or an emerging platform, perpetual contracts have become one of the core businesses.

At the same time, perpetual contracts are also highly controversial due to their high leverage, complex mechanisms, and risk management challenges — like a double-edged sword: on the one hand, they allow traders to use limited funds to capture bigger market opportunities; on the other hand, excessive leverage or neglect of risk control can lead to painful outcomes like instant liquidation and funds going to zero. Therefore, truly understanding the mechanisms and risks of perpetual contracts, and combining them with scientifically designed trading strategies, is the key to determining whether you can remain undefeated in this market.

This article will take you from basic concepts to deeper logic, comprehensively dissecting the operating mechanisms, trading logic, risk points, and industry significance of perpetual contracts. We will also combine SuperEx’s practical cases to help readers better understand the positioning and value of this product in the crypto market.

https://news.superex.com/articles/613.html

A perpetual contract is a contract with no expiration date. In traditional finance, futures contracts have fixed delivery dates — such as one month, three months, or one year — but in the crypto market, perpetual contracts can be held indefinitely until the trader closes the position voluntarily.

Their key differences from traditional futures lie in:

• No expiration/delivery: you don’t have to worry about contract expiry and can hold positions for a long time based on the market.

• Funding rate mechanism: periodic settlement ensures that contract prices remain relatively aligned with spot market prices.

• High leverage: most exchanges allow 10x, 20x, or even 100x leverage, which makes perpetual contracts full of opportunities but also hidden risks.

The history of contract trading is very long. From the first futures contract in the United States in 1848 to today, there have been 174 years of history. From a fundamental perspective, the essence of a contract is a delivery agreement: it stipulates that on a future date, the buyer and seller deliver at a specified price. When financial leverage is added to this agreement, it becomes highly favored by the market.

Contract trading in the crypto market first appeared in 2013. Evolving from traditional financial contract trading, it began localized development. Based on the original delivery agreement and combined with the crypto market’s T+0 two-way trading rule, a new agreement was derived: the perpetual contract.

Perpetual contracts were first proposed by BitMEX in 2016 and were considered a bold innovation at the time. As the name implies, a perpetual contract never expires — so long as you are not liquidated, you can hold it indefinitely. In addition, perpetual contracts introduced the concept of a spot price index and, via associated mechanisms, pull the perpetual price back toward the spot index price. Therefore, unlike traditional futures, the perpetual contract price will not deviate much from the spot price most of the time. Compared with traditional futures contracts, this is a big step forward.

Today, it has become one of the most popular derivative tools in the global crypto market. According to multiple research institutions, perpetual contract volume has long accounted for more than 70% of the entire crypto derivatives market.

To truly understand perpetual contracts, you must grasp several key mechanisms:

Leverage allows you to use less capital to control larger contract value. For example:

• Account funds: 1000 USDT

• Use 10x leverage

• Open position value: 10,000 USDT：This means that if price rises 10%, in theory you can earn 100% return. Conversely, a 10% drop can also liquidate you.

• Initial margin: the minimum capital required to open a position.

• Maintenance margin: your account funds must be above a certain ratio to avoid forced liquidation.

• Forced liquidation (liquidation): when funds are insufficient to cover losses, the system automatically closes the position to prevent greater risk.

This is the most distinctive mechanism of perpetual contracts.

• When the contract price is above the spot price, longs pay funding to shorts.

• When the contract price is below the spot price, shorts pay funding to longs.This design ensures the contract price will not significantly deviate from the spot price over the long term.

To avoid unfair liquidations caused by market manipulation, exchanges use the mark price — rather than the last traded price — to calculate PnL. This mechanism is strictly enforced on SuperEx as well.

• No expiration, flexible operation: traders don’t need to consider delivery dates and can hold positions long-term.

• Freedom to go long or short: you can profit in both rising and falling markets.

• Leverage amplifies returns: small capital can also capture big moves.

• Strong liquidity: on leading exchanges like SuperEx, mainstream perpetuals have ample depth and low slippage.

• Funding rate arbitrage: some professional traders even achieve stable returns via funding rate differentials.、

However, perpetuals are not a guaranteed-profit game. The risks they hide can be even higher than in the spot market.

Leverage is a double-edged sword. Even slight market fluctuations can trigger liquidation. Statistics show that most beginner losses come from over-leveraging.

Because contracts can be opened and closed at any time, many people fall into the trap of frequent trading. Short-term battles often make retail traders vulnerable to emotional swings.

Although the rate itself isn’t high, long-term holding can see profits eroded by funding. Especially in extreme markets, funding can spike abnormally high.

Risk controls differ across exchanges. If platform risk control is insufficient, negative-equity positions and liquidation disputes can occur. Therefore, choosing a compliant and secure platform is crucial.

• Margin: margin is used to cover losses caused by bankrupt users’ negative-equity positions, ensuring profitable users are not affected.

• Cross margin: all positions in the account share margin, and PnL across positions can offset one another.

• Cross margin collateral: uses all available account balance as margin to avoid forced liquidation. Any realized profits from other positions can help add margin to a losing position.

• Isolated margin: each position’s risk and return are independent; margin and PnL are accounted for separately per position.

• Isolated margin collateral: the maximum loss of an isolated position is limited to the initial margin plus any added margin for that position. If forced liquidation occurs, the user only loses the isolated position’s margin; the account’s available balance will not be tapped. By isolating the margin used for a given position, you can cap the loss at the initial margin, which helps when your short-term speculative strategy fails.

• Sub-account (segregated account): in a sub-account mode, a certain amount of margin must be transferred into a designated account. If the margin ratio ≤ 0, the position will be forcibly liquidated, and the trader may lose all the margin under that account.

• Long: first buy the contract at an appropriate price and then sell later after the price rises to earn the spread — commonly called “buy first, sell later.”

• Short: first sell the contract at an appropriate price and then buy back after the price falls to earn the spread — commonly called “sell first, buy later.”

• Maker: placing a resting order — submitting an order with specified price and quantity and waiting for others to trade against it.[Placing a certain quantity of orders at book prices to immediately execute against resting orders on the order book.]

• Mark price: an assessment of the fair price of the perpetual contract. Its main role is to calculate unrealized PnL and serve as the basis for forced liquidation.

• PnL: PnL can be divided into realized and unrealized. If you still hold a position, the PnL of that position is unrealized and fluctuates with the market. Conversely, the PnL after closing is realized, because the closing price is the transaction price in the contract market; therefore realized PnL has nothing to do with the mark price. Unrealized PnL is calculated using the mark price, and it is usually unrealized losses that lead to forced liquidation.

Compared with traditional futures, the biggest advantage of the Perpetual Swap is the lack of a delivery date, making it suitable for mid- to long-term strategy trading. Compared with simple “buy up or buy down,” reasonable use of strategies can help traders improve win rates, control risk, and achieve stable returns. We will discuss strategies from the following five common perspectives:

Trend following is the most common strategy for perpetuals. Its core idea is “once a trend forms, it often persists,” so traders follow the market direction and establish long or short positions.

In practice, investors often use technical indicators to confirm trends. For example, use moving averages (MA) to observe whether price is running above long-term MAs; use Donchian Channels or Bollinger Bands to identify breakouts. If BTC breaks a key resistance accompanied by rising volume, then establishing a long position in the perpetual market is following the trend.

The advantage of trend following is that it’s easy to understand and very effective in one-sided bull or bear markets. The downside is that in choppy markets, it’s easy to be stopped out by “false breakouts.” Therefore, trend following often needs to be combined with position control and take-profit/stop-loss mechanisms to keep losses within acceptable ranges when conditions are unfavorable.

In short, trend following does not aim to capture every wiggle, but to take the main portion of a trend.

There is a unique connection between perpetuals and spot — the funding rate. It’s a mechanism designed to keep the contract price close to the spot price.

When the funding rate is positive, longs pay shorts; when negative, the opposite. This provides opportunities for arbitrageurs. For example, when market sentiment is extremely bullish, funding may be very high. An arbitrageur can buy the underlying asset in the spot market while opening a short in the perpetual market, thereby locking in an almost risk-free return.

In addition, cross-exchange arbitrage is also common. At times, different platforms will price the same asset’s perpetuals differently. Arbitrageurs can buy on the cheaper platform and sell on the more expensive one to capture the spread.

The advantage of arbitrage strategies is relatively lower risk and non-dependency on market direction. The drawback is the large capital requirement, potentially low yields, and the need for real-time monitoring of market data and funding rates — otherwise, the best windows may be missed.

In the highly volatile crypto market, risk management is more important than return. Hedging is a core function of perpetuals, allowing investors to establish opposite positions to offset price risk.

Example: an investor who is long-term bullish on the Ethereum ecosystem may hold a large amount of ETH spot but worries about short-term downside. They can open a proportional short in perpetuals as a hedge. If ETH falls, the spot loss is partially offset by the short’s gain; if price rises, although the short loses, the spot gains more.

This operation is akin to insurance, helping investors “lock in” asset value and reduce emotional decision-making. Hedging is very common among miners, institutions, and long-term investors. For example, Bitcoin miners use perpetual shorts to hedge BTC they expect to mine in the coming months to mitigate downside risks.

Note that hedging does not eliminate risk; it only transfers or reduces it. Traders should choose the hedge ratio based on position size, risk tolerance, and capital management rules.

The 7×24 nature of perpetual markets is well-suited for quantitative and high-frequency strategies. Quant trading builds algorithmic models to exploit small market fluctuations repeatedly, aiming for long-term stable returns.

Common quantitative strategies include:

• Market-making: placing orders on both bid and ask to earn the spread;

• Statistical arbitrage: seeking mean-reversion opportunities based on historical data;

• Momentum trading: capturing short-term bursts;

• Grid trading: repeatedly buying low and selling high within a price range to harvest volatility.

Quant trading has a high entry barrier for individuals, requiring programming skills, historical backtesting, and strict risk control. But with exchange APIs and third-party quant platforms, retail users increasingly have access to quant tools. For example, platforms like SuperEx provide quant trading interfaces so users can configure automated strategies and reduce emotional interference.

The advantages of high-frequency and quant strategies are strong discipline and immunity to fear/greed in execution. The drawbacks are high requirements for systems, capital, and strategy optimization — and potential constraints from market liquidity and fee costs.

Contract copy trading, as the name implies, allows users in the futures market to avoid making their own judgments about trends; they simply select a trusted trader to “follow,” and the system automatically mirrors that trader’s actions, achieving truly “hands-off” trading.

• For beginners without trading experience, copy trading is a way to “borrow brains to make money.”

• For busy investors who cannot watch the market all day, copy trading offers a kind of “intelligent custody” experience.

• For traders with their own strategies who want to become star managers, copy trading is a new stage to showcase skills, gain followers, and share profits.

SuperEx’s “Contract Copy Trading” feature is fully live, supporting one-click replication of professional traders’ contract operations — enabling easy following, intelligent risk control, and stable returns. This function improves upon traditional copy-trading systems on the market, delivering comprehensive upgrades in user experience and profit-sharing mechanisms.

• For followers: low-threshold participation in the futures market and an easy-to-use contract-trading experience for everyone. SuperEx has built a broad avenue to “profit from volatility by following experts.”

• For lead traders: SuperEx provides a new channel for building IP and sharing revenue. Certified lead traders can obtain 10% of followers’ profits. In addition, SuperEx will later support manual configuration of follower ratios by lead traders.

SuperEx has set strict admission criteria for traders, allowing only operators with stable profitability and strong risk control to be publicly listed. All trading data is open and transparent, including historical returns, win rate, max drawdown, capital scale, follower returns, etc., helping users make informed decisions.