What is Perpetual Contracts: How Crypto Perpetual Futures Work on OKX

A perpetual contract is a type of derivative that lets traders buy or sell the future price of crypto assets—without an expiry date. Perpetual trading has exploded in popularity, now representing over 75% of all crypto derivatives volume. With perpetual contracts (often called "perpetual futures" or just "perps"), traders gain flexibility to profit from price moves or hedge positions, day or night, in 24/7 crypto markets. In this guide, you'll learn exactly what perpetual contracts are, how they work, their benefits and risks, how to start trading perps on OKX, and actionable tips for safer trading. We'll break down perpetual vs. traditional futures, funding, leverage, risk controls, and more, so you can trade with confidence.

What Are Perpetual Contracts?

Perpetual contracts, also known as perpetual futures or perpetual swaps, are cryptocurrency derivatives that allow traders to speculate on asset prices without actually owning the underlying coins. What sets perpetual contracts apart from standard futures is that they never expire—positions can be held indefinitely. Unlike traditional futures, which have a set expiration and settle on a specific date, perpetual contracts use a funding mechanism rather than expiry to keep prices aligned with spot markets.

Historically, perpetual swaps originated in the crypto market as a way to mirror spot asset prices while offering leverage. Their flexibility and 24/7 trading nature have made them the most popular product in crypto derivatives. The main differences between perpetual contracts and traditional futures are:

• No expiration date: You can keep your position open as long as you maintain required margin.
• Funding mechanism: Instead of settling, traders regularly pay (or receive) a funding rate.
• Mark pricing: Ensures fair, real-time valuations, reducing manipulation risks.

Platforms like OKX offer a diverse selection of perpetual contracts, covering major assets such as BTC, ETH, and other leading coins, with advanced risk controls and liquidity.

How Do Perpetual Contracts Work?

Let’s walk through a simple example:

1. Enter trade: You open a BTC/USDT perpetual long at $40,000 for 1 BTC with 10x leverage.
2. Hold position: You pay or receive funding every 8 hours, depending on market rates.
3. Manage trade: You monitor margin, add collateral, or adjust stops as needed.
4. Close position: Sell your contract any time at the latest market (mark) price.

With expiry futures, you’d have to exit or roll over on expiration—but with perpetual contracts, you control exactly when to trade, providing more flexibility for active strategies.

Key Features of Perpetual Contracts

Perpetual futures contracts have unique mechanics that all traders should understand before trading:

• No Expiration Date: Trade continuously, with no forced rollovers.
• Funding Rate: Periodic payments exchanged between longs and shorts, anchoring perpetuals to spot prices.
• Leverage: Amplify trades, sometimes as high as 100x on some platforms. Higher leverage means higher risk and potential for liquidation.
• Mark Price: A dynamically calculated fair value that helps determine liquidation and reduces manipulation.

OKX utilizes a transparent methodology for funding and mark prices, detailed in the OKX documentation.

Funding Rate Explained

The funding rate is what keeps perpetual contract prices close to the spot price. If the contract price trades above spot (positive funding), long positions pay shorts. If it trades below spot (negative funding), shorts pay longs.

For example, on OKX:

• If the BTC perpetual has a funding rate of +0.01%, longs will pay shorts $1 per $10,000 position every 8 hours.
• If negative, shorts make the payment instead.

Mark Price and Liquidations

Mark price is an average price from global order books—not just last trade—offering fair, real-time valuations.

Liquidations are triggered based on mark price, protecting traders from sudden market manipulation or "price wicks." OKX’s real-time monitoring and robust mark price methodologies minimize forced liquidations and help keep the platform safer for all users.

Benefits and Use Cases of Perpetual Trading

Why do so many traders choose perpetual trading? Perps have grown popular because they offer:

• Unmatched Flexibility: Hold positions as long as needed, enter/exit 24/7.
• Leverage: Amplify potential gains (or losses) without locking massive capital.
• Deep Liquidity: Major platforms like OKX ensure tight spreads for smooth perp trading across dozens of pairs.

Hedging and Speculation

Perpetuals suit a variety of strategies:

• Hedging: An ETH spot holder might short ETH perpetuals to protect against price dips.
• Speculation: Try to profit from price swings by going long or short on trending assets.

On OKX, traders can access over 100 perpetual pairs, high liquidity, and global coverage—ensuring fast execution when it matters most.

💡 Pro Tip: Use small amounts of leverage while learning to manage risk!

Risks of Trading Perpetual Contracts

While perpetuals offer opportunities, they also carry serious risks (often amplified by leverage):

• Liquidation Risk: Leverage means a small price move can wipe out your margin. For example, 10x leverage means a 10% move against your position risks full loss.
• Funding and Hidden Costs: Negative funding rates mean you might pay regular fees to hold positions, especially during market imbalances.
• Volatility and Manipulation: Crypto’s inherent volatility can trigger rapid liquidations. While OKX uses mark prices to reduce this risk, manipulation is still possible on smaller assets.

OKX protects traders with an insurance fund to cover shortfalls and reduces systemic concerns with auto-deleveraging for worst-case scenarios—a robust, user-focused structure to manage risk.

💡 Pro Tip: Always set stop-loss orders and never risk more than you can afford to lose!

Risk Disclaimer: Trading perpetual contracts involves significant risk. Only trade with funds you can afford to lose, and consider practicing on a demo account first.

How to Trade Perpetual Contracts on OKX

Ready to get started? Here’s a step-by-step guide to trading perpetual contracts on OKX:

1. Sign Up for OKX: Register for a free account using your email.
2. KYC Verification: Complete identity checks, required for higher limits and compliance (regional restrictions may apply).
3. Fund Your Account: Deposit crypto (BTC, ETH, USDT) or fiat using integrated payment gateways.
4. Choose Perpetual Contract: Browse supported pairs and select the asset you want to trade (e.g., BTC/USDT perpetual).
5. Set Leverage & Margin: Choose between isolated or cross margin and adjust leverage according to your risk appetite. Unified Account on OKX makes it easy to manage margin for all derivatives and spot together.
6. Place Order: Enter long (buy) or short (sell), select order type (market or limit), and confirm.
7. Monitor and Manage: Track position PnL, margin ratio, funding payments, and update stops as needed.
8. Close/Settle: Manually close position or set take-profit/stop-loss in advance.

OKX offers simple onboarding, in-depth tutorials, and a streamlined mobile trading app for trading on the go.

Account Setup and KYC

Register on OKX, verify your identity (KYC), and fund your account with crypto or fiat. Regional requirements may vary, and some countries restrict perpetual trading. Always check local compliance.

Placing Your First Perpetual Trade

1. Go to "Trade" > "Derivatives" > "Perpetual" on OKX.
2. Select your trading pair (e.g., ETH/USDT Perpetual).
3. Set order type (market/limit/stop), choose leverage, enter position size.
4. Confirm and execute the trade.

Managing Leverage and Margin

• Isolated Margin: Risk is limited to margin allocated for that position. If liquidated, only isolated funds are lost.
• Cross Margin: Uses available balance to support all positions. Can help prevent liquidation, but risks your broader balance.

Switch between isolated and cross margin directly within the OKX order panel and find helpful guides in the help center.

Perpetual Contracts vs. Expiry Futures: Key Differences

How do perpetual contracts measure up to traditional expiry futures? Here’s a quick comparison for clarity:

Major exchanges like OKX support both product types, letting traders choose the best fit for their strategy—whether you want flexibility (perpetuals) or plan for set expiry (futures).

Advanced Features and Security on OKX Perpetuals

Security and fund safety are top priorities at OKX. Features include:

• Proof-of-Reserves: Frequent third-party verified proofs showing user funds are fully backed and available for withdrawal.
• Insurance Fund: A dedicated buffer to compensate users if liquidations cannot be filled at fair prices. Protects users from bigger losses.
• Risk Controls: Auto-deleveraging (ADL), circuit breakers, and unified margin management help maintain platform health.
• Platform Security: Multi-layered protection, including 2FA, anti-phishing codes, and constant monitoring by OKX’s security team.

Learn more by reviewing the OKX insurance fund and platform transparency reports.

Risk Management Strategies for Perpetual Trading

Smart traders know that risk management is critical in perpetual trading. Here’s how to keep safer:

• Stop-Loss Orders: Always set stops to limit losses if the market moves against your position. For example, buying BTC perp at $40,000 with a $2,000 stop-loss caps risk at 5%.
• Position Sizing: Never risk more than a small percent (e.g., 1-2%) of your trading capital per trade.
• Platform Tools: Use OKX’s position monitoring dashboards, liquidation alerts, and in-built calculators to gauge margin health and set strong risk boundaries.

Visit OKX’s risk management strategies for more.

Frequently Asked Questions

What is a perpetual contract?

A perpetual contract is a crypto derivative that allows traders to buy or sell an asset’s future price with no expiration date. You can hold positions as long as you want, with regular funding payments.

What are perpetual futures?

Perpetual futures and perpetual contracts are essentially the same in crypto. They are derivative products that offer exposure to price moves without expiry, relying on funding rates.

How do funding rates work?

Funding rates are periodic payments long and short holders exchange to keep the contract price near the spot market. Positive rates mean longs pay shorts; negative means shorts pay longs. This keeps prices aligned.

What happens if I get liquidated?

If your margin drops too low, your position may be liquidated at the mark price. On OKX, the insurance fund covers shortfalls, and the ADL system may unwind positions to protect the market.

Are perpetual contracts risky?

Perpetual contracts carry high risk from leverage, volatility, and funding costs. You can lose more than your initial margin. Use stop-loss, small position sizes, and strong risk management to stay safer.

Can US users trade perpetuals on OKX?

Currently, OKX does not offer perpetual trading to US residents due to regulatory restrictions. Always check your local regulations before trading.

Conclusion

Perpetual contracts have transformed crypto trading, offering flexibility, leverage, and 24/7 opportunity—but with significant risks that require careful management. Key takeaways:

• Perpetuals let you trade crypto prices without expiry, with funding rates keeping prices on track.
• Key risks include liquidation, leverage, and funding costs—always use risk controls.
• OKX stands out for liquidity, security features, and comprehensive risk tools for perpetual traders.

Curious to try? Practice with demo trading on OKX to start exploring perpetual contracts safely before committing real funds.