Monish Muralidharan
5
min read
Sep 18, 2025
Crypto trading isn’t just about buying and selling coins on the spot market. There’s a whole world of advanced instruments that can amplify opportunities and also risks. One of the most popular is perpetual futures (often called “perps”).
If you’re a beginner, perpetual futures might sound intimidating, but this guide will break them down in simple terms. We’ll use a Q&A format to explain what perps are, how they differ from spot trading, why traders love them, the risks involved, and how you can start using them safely.
In the end, we’ll also highlight how Mettalex offers a beginner-friendly way to trade perpetuals, focusing on benefits like no slippage, simplicity, accessibility, and transparency.
What Are Perpetual Futures in Crypto?
Perpetual futures are a type of derivative contract that lets you speculate on the price of a cryptocurrency without ever owning the actual coin. They’re similar to traditional futures contracts, but with one key difference – they have no expiration date.
In other words, you can hold a position “perpetually” (indefinitely) as long as you meet the margin requirements. This flexibility means you don’t have to worry about a contract expiring every month or quarter, and there’s no need to roll over to a new contract.
Perpetual futures (or perps) blend features of spot trading and standard futures. Like spot trades, they have real-time pricing and can be entered or exited at any time. Like futures, they allow leverage; you can put down a fraction of the trade’s value as collateral to control a larger position. For example, with 10× leverage, a $100 investment can control $1,000 worth of Bitcoin. This amplifies potential profits and potential losses.
Because these contracts never settle, exchanges use a mechanism called the funding rate to keep the price of the perpetual futures contract aligned with the actual market price of the coin (the spot price). The funding rate is a small fee that long and short traders periodically pay each other, depending on where the perp’s price is relative to the spot price. If the perp price is above the spot price, longs pay a fee to shorts; if it’s below, shorts pay longs. This incentive helps prices align with the actual market. As a trader, it means you might pay or earn funding fees while holding a position, typically every 8 hours or as defined by the platform.
In summary, a perpetual future is a crypto trading contract with no expiration, where you can go “long” (bet on the price going up) or “short” (bet on the price going down) with leverage, and it uses funding payments to tether its price to the underlying asset’s value. Perps have become extremely popular in the crypto world because they offer flexibility and continuous trading in a 24/7 market.
How Are Perpetual Futures Different from Spot Trading?
Spot trading means you are buying or selling the actual cryptocurrency immediately, and you own the asset outright in your wallet or account. For example, if you buy 1 ETH on the spot market, you now have 1 ETH. Perpetual futures trading, on the other hand, does not give you ownership of the asset like you’re trading a contract that mirrors the price of ETH. Here are the key differences:
Ownership: In spot trading, you hold the real coins or tokens. You can transfer them, use them, or store them as you please. In perp trading, you hold a position (long or short) in a contract; you don’t actually own the underlying. Your profit or loss is based purely on price changes, and the contract is settled in a stablecoin or the base asset when you close it.
Leverage: Spot trades are typically one-to-one – if you have $500, you can buy $500 worth of BTC (some exchanges offer small leverage on spot, but usually up to 3-5×). With perpetual futures, high leverage is available (often 10×, 20×, even 50× or more on some exchanges). This means you can enter larger trades than your capital would allow on spot. For example, with 20× leverage, a $500 margin can open a $10,000 position. Important: While leverage can multiply gains, it also multiplies losses – a 5% drop on a 20× leveraged position would wipe out 100% of that margin.
Settlement/Expiration: Spot trades settle immediately; you swap asset A for asset B at the current price, trade done. Perpetual futures never expire; your position remains open until you decide to close it or if it gets liquidated due to insufficient margin. There’s no set date when the contract settles, as there would be in a traditional futures contract. This no-expiry feature is unique to perps.
Shorting and Hedging: On spot markets, betting against an asset (shorting) is not straightforward – you’d have to borrow the asset or use complex margin techniques. With perps, going short is as easy as clicking “Sell” on the contract. This makes it simple to profit from price drops or hedge your portfolio (e.g., shorting BTC perps to offset potential losses on BTC you hold).
Costs and Fees: When you trade spot, the main fees are trading fees and possibly withdrawal fees. With perps, you have trading fees and the funding rate to consider. Funding fees, as mentioned, are periodic and can add costs if you’re on the paying side for a long time. Also, if you use high leverage, the exchange might charge higher fees or interest on the borrowed funds. Spot trading generally has fewer moving parts cost-wise.
Risk and Complexity: Spot trading is straightforward; your risk is just the market price of the asset you hold. Perpetual futures are more complex and riskier for beginners. You have to manage margin (ensure you have enough collateral in your account), be mindful of liquidations, and understand that a highly leveraged position can be wiped out quickly, even by normal market volatility. We’ll cover specific risks in the next section, but it’s fair to say spot trading is simpler and carries lower inherent risk than futures trading.
In short, spot trading is like owning and exchanging actual coins, whereas perpetual futures trading is like making a side bet on the coin’s price movement with borrowed money. Spot is typically recommended for beginners to learn the market, whereas perps are for those looking to amplify trading strategies, ideally once they understand the mechanics and risks.
Why Are Perpetual Futures So Popular?
Perpetual futures (or perps) have become one of the most popular tools in crypto trading and for good reason. Here’s why traders, from beginners to pros, love them:
Leverage for Bigger Moves: Perps let you control larger positions with less capital, meaning bigger potential gains (and losses). It’s a high-risk, high-reward setup that appeals to ambitious traders.
No Expiry Dates: Unlike traditional futures, perps don’t expire. You can hold your position as long as you want, great for long-term trends or flexible strategies.
24/7 Trading: Crypto never sleeps, and neither do perps. You can trade anytime, day or night, even on weekends, which fits perfectly with the 24/7 nature of the crypto market.
Simple Shorting: Want to bet on a token’s price going down? Perps make shorting easy, no need to borrow assets manually like you would on spot exchanges.
Deep Liquidity: Perpetuals often have the highest trading volume on both centralized and decentralized exchanges, which means fast trade execution and tight spreads.
Built for Hedging: Beyond speculation, perps are a powerful risk management tool. You can hedge your portfolio without selling your long-term holdings.
Fast-Paced & Flexible: For many, perps offer the excitement of advanced trading strategies, arbitrage, spread trades, and more. All without the limitations of spot trading.
What Are the Risks of Trading Perpetual Futures?
While perps offer exciting opportunities, they come with serious risks, especially for new traders. Here are the key things to watch out for:
Leverage Can Liquidate You Fast: Using high leverage means small price moves can wipe out your position. A 2% drop with 50× leverage? You’re liquidated. Start small and manage your risk.
Crypto Volatility = Surprise Losses: Markets move fast. Price “wicks” or flash crashes can trigger liquidations or bad exits, even if the market recovers moments later.
Funding Fees Add Up: Holding perps isn’t free. Depending on the market, you might pay (or receive) funding every few hours. Over time, these fees can eat into your gains.
Complex Tools = Easy Mistakes: Terms like margin, liquidation price, and funding can be confusing. Misunderstanding how perps work can lead to costly errors. Always double-check your trade settings.
24/7 Risk Exposure: Crypto trades non-stop. Your position is vulnerable even while you sleep. Use stop-losses and alerts to avoid overnight surprises.
Platform Risk (CEX or DEX): Centralized exchanges (CEXs) may face hacks or mismanagement. Decentralized platforms (DEXs) carry smart contract and oracle risks. Stick to reputable platforms with good security practices.
Emotional Traps: The fast-paced nature of perps can lead to fear, greed, and poor decisions. Stay disciplined, trade with a plan, and don’t chase losses.
Bottom line: Perpetual futures amplify both gains and losses. Beginners should approach with caution and always prioritize learning, risk control, and proper trade sizing.
How Can a Beginner Start Trading Perps Safely?
If you’re new and determined to try perpetual futures, here are some safety tips and steps to begin responsibly:
Educate Yourself First: Make sure you understand how perpetual futures work before trading real money. Learn the basic terms (margin, leverage, funding rate, liquidation). This guide is a start, but also read tutorials and watch explainer videos. Many exchanges offer free demo accounts or testnet trading; take advantage of those to practice in a simulated environment. Treat it as a learning phase to get comfortable with placing orders and seeing how P/L (profit and loss) moves with price changes.
Start Small: When you place your first real trade, use a small amount of capital. Only risk what you can afford to lose. Think of it as the cost of education. Even $20 or $50 is enough to get a feel for perp trading. Starting small keeps your mistakes small. As you gain experience and consistency, you can gradually increase your trade size.
Use Low Leverage (or None): Just because an exchange offers 50× or 100× leverage doesn’t mean you should use it. In fact, as a beginner, it’s wise to start with 2× or 3× leverage at most, or even 1× (which is effectively like spot trading) to see how things work. Low leverage gives you a wider margin for error; your position won’t liquidate on a minor fluctuation. You can always increase leverage later when you truly understand how it impacts risk. Remember, avoid overleveraging. It’s a common reason new traders get wiped out.
Always Set a Stop-Loss: Before entering a trade, decide on a price level where you’ll cut your loss and set a stop-loss order immediately. This is crucial risk management. If the trade goes against you, the stop-loss will limit how much you lose. For example, you might decide you’re willing to risk 2% of your account on a trade, calculate what price move would cause that loss, and set your stop accordingly. Disciplined use of stop-losses protects you from catastrophic losses and takes the emotion out of deciding when to exit a bad trade.
Monitor Positions and Manage Risk: Don’t “set and forget” perp trades, especially when using any leverage. Keep an eye on your open positions. Use features like take-profit orders to lock in gains and trailing stops to protect profits if the market turns. Be mindful of the funding rate; if it’s heavily against you, it might be costly to keep the position open for long. If you’re using a CEX, enable two-factor authentication (2FA) and other security measures on your account to protect against hacks. Good risk management also means not putting all your trading capital on one platform or in one trade.
Learn from Each Trade: After you close a trade, win or lose, take a moment to analyze it. Did you follow your plan? Did you exit too early or too late? Keeping a trading journal can help you identify mistakes and improve. Every trader makes losing trades. What’s important is to learn the lessons (was I overleveraged? Did I trade out of FOMO?) and refine your strategy. Over time, this reflection helps you trade more safely and effectively.
Prefer Reputable Platforms: In the beginning, stick to well-known exchanges or platforms with a good track record. The biggest CEXs or top DEXs (like dYdX, GMX, etc.) have lots of users and community trust. They likely have better liquidity and more safeguards in place. A newcomer might want to avoid very new or obscure platforms until they understand what to look for. Check if an exchange has insurance funds, a testnet, educational resources, and responsive support, those are signs they cater to helping users succeed.
Don’t Rush – Practice Patience: Finally, be patient with yourself. Perpetual futures trading has a steep learning curve. It’s often best to build a foundation with simpler trading (like spot) before diving into perps. unless you’re using a demo. There’s no shame in taking time to study and practice. The crypto markets aren’t going anywhere; it’s better to miss a few opportunities while learning than to dive in unprepared and lose your money. When you do start, go slowly. If at any point it feels overwhelming, step back and continue learning or stick to spot trading for a while longer.
By following these steps, a beginner can gradually and safely get involved in perps trading. The key is caution, continuous learning, and treating risk management as priority number one. As one guide noted, “newbies should also keep from overleveraging, as it may result in fast and big losses.” Start small, stay disciplined, and you’ll improve over time.
Perpetual futures offer powerful opportunities, but they also carry risks that beginners must approach with caution. Success depends on understanding leverage, volatility, and how these markets work. Platforms like Mettalex make the journey easier by removing slippage, simplifying the trading process, and ensuring transparency through blockchain. With the right knowledge and the right tools, even new traders can explore perpetual futures with greater confidence and clarity.
Get Started Today
Now that you understand the basics of perpetual trading, it’s the right time to explore Mettalex. The platform is currently in beta with cross-chain trading available. If you haven’t tried it yet, sign up now at beta.mettalex.ai.