What is a perpetual contract?
A perpetual contract is a contract with no preset expiry date. Traders can participate in price movements of the underlying asset by going long or short, and use margin to establish positions. Having no expiry date does not mean that a position can necessarily be held indefinitely. If the margin condition reaches the liquidation criteria, the system may still forcibly liquidate the position. Trading a contract is also not the same as directly purchasing or holding the underlying asset.
How are perpetual contracts traded?
When you expect the price to rise, you can buy to open a long position; a price increase may result in profit, while a price decrease may result in a loss. When you expect the price to fall, you can sell to open a short position; a price decrease may result in profit, while a price increase may result in a loss.
Closing a position means ending a position that is already held. Traders can submit an order to close a position, but whether the order is executed and at what price depends on the order type and market conditions at the time.
Example: Both Xiao Li and Xiao Wang expect BTC to rise. When the BTC price is 50,000 USDT, each invests 50,000 USDT:
- Xiao Li buys 1 BTC in the spot market without using leverage.
- Xiao Wang uses 10x leverage to establish a perpetual contract long position worth 500,000 USDT, representing a position equivalent to 10 BTC.
Assume that the BTC price falls to 49,900 USDT, a decrease of 0.2%:
| Item | Xiao Li: Spot | Xiao Wang: Perpetual contract |
| Invested funds | 50,000 USDT | 50,000 USDT margin |
| Price risk exposure | 1 BTC | Equivalent to 10 BTC |
| Illustrative loss | 100 USDT | 1,000 USDT |
| Loss relative to invested funds | 0.20% | 2% |
If BTC continues to fall to 49,750 USDT, a decrease of 0.5%:
| Item | Xiao Li: Spot | Xiao Wang: Perpetual contract |
| Illustrative loss | 250 USDT | 2,500 USDT |
| Loss relative to invested funds | 0.50% | 5% |
Both invested the same amount of funds, but Xiao Wang's position is worth 10 times as much as Xiao Li's. Therefore, the profit or loss resulting from price movements is also approximately 10 times greater. This does not mean that Xiao Wang will necessarily be liquidated at 49,750 USDT. The actual liquidation time depends on the mark price, margin condition, maintenance margin requirement and applicable fees.
What are margin and leverage?
Margin is the asset required to open and maintain a contract position. When opening a position, the initial margin requirement must be met; while the position is held, it must also meet the maintenance margin requirement.
Leverage allows traders to establish larger positions with a relatively smaller amount of margin. It magnifies both profits and losses relative to the margin.
For example, assume that 1,000 USDT of margin is invested to establish a long position worth 10,000 USDT. Under simplified conditions that exclude fees, assume that the position size remains unchanged and no liquidation occurs:
| Underlying asset price movement | Illustrative position profit or loss | Relative to initial margin |
| 5% increase | Approximately +500 USDT | Approximately +50% |
| 5% decrease | Approximately −500 USDT | Approximately −50% |
What is the difference between cross margin and isolated margin?
Under cross margin mode, available margin within the applicable scope can jointly support positions. This also means that losses may consume more available funds and affect other positions.
Under isolated margin mode, a position uses independently allocated margin. When the market moves adversely, the position may be liquidated; if additional margin is added to it, the funds bearing the risk of that position will also increase.
Neither mode eliminates the risks of leveraged trading. The actual scope of shared margin and the methods of adjustment are subject to the applicable rules of the selected contract.
What are the purposes of the different prices on the trading page?
| Price | Meaning |
| Last traded price | The execution price of the most recent transaction in the contract |
| Index price | The price formed based on price data from reference markets |
| Mark price | The reference price used to assess a position's unrealised profit or loss and liquidation risk |
What is the funding rate?
Perpetual contracts have no preset expiry date and generally use a funding rate mechanism to keep the contract price close to the reference market price.
At the time funding fees are settled, eligible long or short position holders may pay or receive funding fees. The funding rate can change, and the payment direction may also change. It is different from the trading fee incurred when an order is executed; funding fees may still be incurred while a position is held, even if it is not closed.
Before trading, check the funding rate, settlement time and applicable rules displayed for the selected contract. Do not treat estimated funding fees to be received as fixed returns.
Under what circumstances will forced liquidation occur?
When the market price moves adversely to the position, causing the margin condition to reach the liquidation criteria under the maintenance margin requirement, the system may forcibly liquidate the position.
Actual margin ratio at a given price ≤ maintenance margin ratio under the current tier
Liquidation price is the price estimated based on the current position and margin condition. It is the price at which liquidation may be triggered when the mark price reaches that level. The estimated liquidation price may change when the position is increased or reduced, margin is adjusted, or the risk limit tier changes. It is not the actual execution price when the position is closed.
What other risk mechanisms may be involved after liquidation?
After liquidation is triggered, the system will handle the relevant position according to the applicable rules. The bankruptcy price describes the price level at which the position's margin is exhausted; it is not the liquidation trigger price and does not mean that a liquidation order will necessarily be executed at that price.
In certain risk situations, the platform may also use an insurance fund or an auto-deleveraging (ADL)* mechanism to manage risk. ADL may affect traders who did not originally trigger liquidation but hold positions in the opposite direction. The activation conditions and processing order of these mechanisms are subject to the platform's actual rules. It cannot be determined solely from a particular price that ADL will definitely be initiated.
What is the relationship between USDT-margined, coin-margined and perpetual contracts?
“Perpetual” indicates that the contract has no preset expiry date; “USDT-margined” and “coin-margined” indicate which asset is used to handle margin and profit or loss. They are two different classification methods: the same contract can be both a perpetual contract and a USDT-margined contract.
What should you pay attention to before trading?
Before placing an order, confirm the margin and settlement assets, contract value, leverage, position mode, trading fees, funding rate and maintenance margin requirement of the selected contract. While holding a position, pay attention to the mark price, margin condition and estimated liquidation price. Stop-loss and other orders are not guaranteed to be executed at the specified price during sharp market fluctuations or insufficient liquidity, nor are they guaranteed to be executed before liquidation.
Disclaimer
This article is provided for product description and educational reference only. It does not constitute investment, trading, financial or legal advice, nor does it constitute an offer to buy or sell any digital assets. The examples in this article are for illustrative purposes only and do not take into account factors such as fees and funding fees. Actual results may differ.
Product features, trading rules, fees and page information may be adjusted. If this article differs from AstralX's latest announcements or the information displayed on the trading page, the latest applicable rules and actual page information shall prevail.
Trading digital asset contracts involves a high level of risk. Leverage magnifies the impact of price fluctuations on margin, and you may lose all of your invested margin. Before trading, fully understand the product rules and make prudent decisions based on your financial situation and risk tolerance.