How Do Perpetual Futures Work? Margin, Funding, Liquidation

Short answer

A perpetual future tracks an asset's price with no expiry date. Traders post margin and go long or short with leverage. Funding is paid or received at set intervals to keep the price near spot. On Binance the default is 8 hours, and many contracts use 4 or 1 hour. If collateral falls below the maintenance margin, the position is liquidated. Gains and losses settle in the margin currency.

Last checked 2026-10-24

Key facts

Expiry	None
Price anchor	Funding payments toward the spot index
Directions	Long or short
Risk control	Margin, maintenance margin, liquidation
BTC reference (BTCUSDT, 2026-10-24)	about 80,726.7 USDT, funding +0.0056% per interval (positive: longs pay shorts). Check the contract page for the current interval.

What makes a perpetual different from a normal future?

A dated future settles on a delivery date, which pulls it to spot. A perpetual never settles, so it uses the funding mechanism instead. That makes it convenient for holding positions of any length. The trade-off is that you pay or receive funding while you hold. Rules and examples below follow Binance USDⓈ-M futures. Other exchanges use similar mechanics but can differ on intervals and fees.

What happens when I open a position?

You choose size and leverage, and the exchange locks initial margin. Unrealized PnL and your liquidation price are both calculated from the mark price, not the last traded price. So a brief wick in the last traded price is less likely to trigger liquidation on its own than it would be if liquidation used the last price. The mark price can still move in a fast market.

If collateral falls below maintenance margin, the position is liquidated and part of the remaining assets is charged as a Liquidation Clearance Fee. Higher leverage means less margin per unit of notional, so the liquidation price sits closer to your entry. The exchange shows the estimated liquidation price in the open position panel. Recheck it after changing size, leverage or margin.

Your liquidation price is roughly where your loss, measured at the mark price, would shrink collateral to the maintenance margin. The maintenance margin rate depends on position size. Binance lists it in the leverage and margin tier table for each contract, so check that table before sizing up.

How is the funding rate set and who pays?

The rate is built from the premium of the contract over the spot index. When the rate is positive, longs pay shorts. When it is negative, shorts pay longs. Funding passes directly between traders, and Binance charges no fee on it.

You only pay or receive funding if you hold a position at the funding time. The rate and the time until the next payment are shown on the contract page. The interval is set per contract and can differ from the 8-hour default, so confirm it next to the rate before holding a position across funding times.

What costs come with a perpetual position?

There are three: trading fees on entry and exit (maker or taker), funding payments while the position is open, and slippage when the order fills at a worse price than expected. A liquidation can add a further fee on top.

For short trades, fees dominate. For positions held for days or weeks, funding can become the largest cost, especially in crowded markets where the rate stays high. Adding these up before a trade shows how far price must move just to break even.

Funding payment = position notional x funding rate. Example: a 1 BTC long on BTCUSDT at about 80,726.7 USDT has a notional of about 80,726.7 USDT. At +0.0056%, one payment is 80,726.7 USDT x 0.0056%, a small slice of the notional that you can multiply out and check against what the exchange charges. The long pays it and a 1 BTC short receives it. If the rate were negative, the direction would reverse.

On an 8-hour interval this payment is charged once every 8 hours. On a 1-hour interval it is charged every hour, so at the same rate the daily cost is far higher. Rates reset every interval, so these figures are a snapshot, not a forecast. Check the live rate and the interval for your contract on the contract page.

Where does the money for profits come from?

From traders on the other side. Before fees, futures are a zero-sum transfer: every long is matched with a short, and funding moves money between them. Trading fees and any Liquidation Clearance Fee go to the exchange.

Who should not trade perpetuals?

Anyone who cannot afford to lose the margin, who has not tested a sizing method, or who lives where these products are restricted. Availability varies by country, and many jurisdictions limit leverage for retail traders. Leverage magnifies losses as well as gains. A small move against a highly leveraged position can wipe out the margin.

Read your own regulator's guidance before you trade. The US Commodity Futures Trading Commission (CFTC) publishes customer advisories, including material on digital asset risks, linked in the sources below.

FAQ

Do perpetual futures expire?

No. They stay open until you close them or they are liquidated.

Can I lose more than my margin?

On isolated margin, only the isolated margin balance for that position is liquidated, so your loss is normally limited to that margin. Fees and extreme moves can add costs. On cross margin, the position draws on your wider futures balance, so more of it is exposed.

Why is funding needed?

Without expiry, funding is the mechanism that keeps the contract price close to spot.

What is the difference between USDⓈ-M and COIN-M perpetuals?

USDⓈ-M contracts use a stablecoin as margin and settle profit and loss in USDT or USDC. COIN-M contracts settle in the underlying coin, so your margin value also moves with the coin's price.

Sources

Figures change. Check the primary sources below.