Crypto Basics: Trading Perpetuals

By RocketFuel Staff

Crypto trading has evolved far beyond just buying tokens and waiting for prices to go up. One of the most powerful and popular tools today is the perpetual contract, often just called a perpetual or perp. These are trading instruments that let you bet on price movements, both up and down, with the added twist of leverage, meaning you can multiply your potential profits or losses.

In this guide, we’ll explain exactly how perpetuals work, what long and short trades mean, how funding rates influence trades, and how to get started on decentralized perpetual trading platforms like Hyperliquid, dYdX, and Jupiter. We’ll also share some beginner-friendly tips to stay safe while trading.

What Is a Perpetual Contract?

A perpetual is a type of crypto futures contract. But unlike traditional futures, it has no expiration date. You can hold your position for as long as you want, minutes, days, or weeks, as long as your margin (collateral) is above the liquidation threshold.

Perps let you:

● Go long or short on an asset (profit if it goes up or down)

● Use leverage to amplify your trade size

● Speculate on price without owning the actual token

Let’s say you think Ethereum is going up. You can go long on ETH-PERP. If it rises, you profit. If it falls, you lose. If you think it’s going down, you can go short and profit when it drops.

Perps are great for traders who want to act on short-term price movements, hedge a position, or gain exposure without swapping tokens. They offer flexibility that traditional spot trading doesn't provide, and allow you to engage with the market from multiple angles.

Leverage: How It Works and Why It’s Risky

Leverage lets you open a bigger position than your actual balance. If you use 5x leverage with $1,000, you’re trading a $5,000 position. This can boost profits if the trade goes your way, but also magnify losses if it doesn’t.

Example:

● You go long with $1,000 at 5x leverage on BTC.

● If BTC rises 10%, your position earns $500, a 50% gain on your margin.

● But if BTC falls 10%, you lose $500, a 50% loss.

● If BTC falls around 20%, your position gets liquidated, and you lose nearly all your margin.

Every perp exchange shows your liquidation price when you open a trade. If the market hits that price, the platform will force-close your position to prevent you from losing more than your margin.

Bottom line: more leverage = more risk. Most beginners should stick to low leverage like 2x or 3x.

Keep in mind, crypto markets are highly volatile. Even small price swings can have a huge impact when you're trading with leverage. Treat leverage with caution and respect.

Long vs. Short: Betting Up or Down

Perpetuals make it easy to trade in both directions.

● A long position means you're betting the price will go up.

● A short position means you're betting the price will go down.

You don’t need to own the token to do either. The exchange matches longs and shorts, or uses a liquidity pool to let you take a side. This makes perps great for hedging, for example, you can short ETH to protect against a price drop while still holding your ETH on-chain.

Understanding when to go long or short is key. A clear view of the market trend, some technical analysis, and good risk management can make all the difference between winning and losing trades.

What Are Funding Rates?

Since perpetuals never expire, they use something called a funding rate to keep the perp price close to the real spot price.

● If more traders are long, the perp price tends to trade above the spot price. Longs then pay shorts a small fee (positive funding rate).

● If more traders are short, the perp price tends to dip below spot. Shorts pay longs (negative funding rate).

● A great place to check overall rates are at https://www.coinglass.com/FundingRate This creates balance. If funding is expensive, traders have an incentive to switch sides,

which keeps prices in line with the real market.

Funding rates are usually paid every 8 hours, but it varies by platform. While these fees are small, they can add up if you hold a position for days. So it’s good to check the current funding rate before opening a trade.

If you're holding a position for a long time, factoring in funding rates can have a big impact on your profitability. Sometimes, high funding costs can quietly eat into otherwise profitable trades.

Where to Trade Perpetuals: Hyperliquid, dYdX, and Jupiter

You don’t need to use a centralized exchange to trade perps. There are powerful decentralized platforms that let you trade with leverage while keeping full control of your crypto. Here are three of the top options:

Hyperliquid

Hyperliquid runs its own high-speed blockchain and has a clean, CEX-like interface. It uses an on-chain order book, which means trades are matched just like on a traditional exchange.

● No wallet required to start, you can sign up with email or connect MetaMask

● Very low fees

● Supports many tokens and up to 50x leverage

● Simple UI with liquidation price, margin info, and PnL clearly shown

Hyperliquid focuses heavily on performance, community engagement, and accessibility for newer traders, making it an exciting choice for both beginners and veterans.

dYdX

One of the oldest and most trusted decentralized perp platforms. It recently moved to its own blockchain and offers:

● A professional trading interface

● Up to 20x leverage

● High liquidity and deep markets

● Wallet connection required, trades are settled on-chain

dYdX is known for its deep liquidity and strong reputation. It's a great pick if you're looking for a more professional trading setup without giving up custody of your funds.

Jupiter

Built on Solana, Jupiter uses a liquidity pool model instead of an order book.

● You trade directly against the pool, no matching needed

● Connect your Solana wallet (like Phantom)

● Up to 100x leverage

● Super fast and low gas

Jupiter's approach makes it very easy for new users to start trading leveraged products without needing to learn order books. Just connect and trade, it’s simple and fast.

How to Trade a Perp in 5 Simple Steps

1. Connectyourwalletorcreateanaccount

2. DepositUSDCoranotherstablecoinasmargin

3. Pickyourmarket(e.g.BTC-PERP,ETH-PERP)

4. Chooselongorshort,setyourleverage

5. Openyourtrade,thenmonitoryourPnLandliquidationprice

You can close your position at any time by making the opposite trade.

Always double-check your liquidation price, leverage settings, and current funding rates before confirming your order.

Risk Management Tips for Perps

Perpetuals are powerful, but you need to respect the risk. Here are some quick rules:

● Start small, don’t go all-in on your first trades

● Use low leverage, high leverage is a fast way to get liquidated

● Set a stop-loss, protect yourself from sudden moves

● Track the funding rate, don’t get drained over time

● Avoid overtrading, focus on quality setups, not constant action

● Never trade money you can’t afford to lose

The goal isn't to make one huge winning trade, it's to survive, stay consistent, and improve over time.

Final Thoughts

Perpetuals open up a world of opportunities for crypto traders. They let you go long or short, use leverage, and trade any time without giving up control of your funds. Platforms like Hyperliquid, dYdX, and Jupiter make it easy to get started, even as a beginner.

But with great power comes great risk. So take it slow, use good risk management, and trade with intention.

If you respect the game, manage your risk carefully, and stay patient, perpetual trading can become a powerful and exciting part of your DeFi journey.

Happy trading, and stay sharp!

Note from Jeff:

I mostly trade on Jupiter now, there’s low fees, lots of liquidity, and it appears that most of the newest coins are on Solana anyways. My favorite trade is reading the news and guessing which direction the market will go, and do a 5-9x small SOL bet in the corresponding direction. For example, when China and the US said things could go back to normal, I already opened a long position for SOL 9.4x. One other piece of advice is to keep a “budget”. If you go over a certain amount you should cash out to prevent yourself from going too big.

My SOL budget is 30 SOL. If I get close to 50 SOL from trading, I will sell the top back to 30 SOL so I don’t get greedy and start betting it all. If I start making bad bets and drop to 20 SOL for example, I start becoming more picky when to open the trades. I also post most of my trades in either the news channel or coaching community.

*Not financial advice

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