> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ryft.market/llms.txt
> Use this file to discover all available pages before exploring further.

# Perps explained

> If you've traded spot crypto but never a perp, this is the background you need.

Already trade perps? Skip ahead to [Logging in](/guides/logging-in).

## What is a perpetual?

A **perpetual future** (a "perp") is a contract that tracks the price of an asset without ever
expiring. Ordinary futures have a settlement date; perps removed the date. You can hold a position
for an hour or a year.

You don't own the underlying asset. Buying `BTC-PERP` doesn't give you Bitcoin; it gives you a
position that gains when Bitcoin rises and loses when it falls. That's why you can go **short** as
easily as **long** — you're trading exposure, not custody. There's nothing to borrow and nothing to
locate.

<h2 id="funding">
  Funding — what keeps the price honest
</h2>

A contract with no expiry has a problem: nothing forces its price to match the real asset. The fix is
the **funding rate** — a small periodic payment between the two sides:

* Perp trading **above** spot → **longs pay shorts**. Being long costs you.
* Perp trading **below** spot → **shorts pay longs**. Being short costs you.

This makes the expensive side pay to stay, pulling the perp price back toward spot. It's a transfer
between traders, not a fee the exchange takes.

<Warning>
  **Why it matters more than people expect.** Funding is charged repeatedly — hourly on some venues,
  every eight hours on others. On a position held for days it can easily exceed everything you saved on
  entry price. A rate that looks trivial per interval is a large annual number: **0.01% every 8 hours
  is roughly 11% a year.**
</Warning>

## Leverage and margin

**Margin** is the collateral backing your position. **Leverage** is how much position that collateral
controls. With $100 of margin at 5× leverage you control a $500 position — a 1% market move is a 5%
move on your money, in both directions.

Leverage doesn't increase your expected return; it scales everything, gains and losses alike, and
brings the liquidation price closer.

### Liquidation

If the market moves against you far enough that your margin can't cover the loss, the exchange
**closes your position automatically**. That typically means losing most or all of the margin on that
position.

| Leverage | Roughly how far the market must move against you |
| -------- | ------------------------------------------------ |
| **2×**   | \~50%                                            |
| **5×**   | \~20%                                            |
| **10×**  | \~10%                                            |
| **20×**  | \~5%                                             |
| **50×**  | \~2%                                             |

Approximate — the exact level depends on the venue's maintenance margin, and fees and funding eat
into your buffer over time. ryft shows your actual **liquidation price** per position; that number,
not the table, is the one to watch.

<Danger>
  **The most common way people lose everything.** At 20× leverage, an ordinary daily move in a major
  asset is enough to liquidate you.
</Danger>

## Perp DEXs vs centralised exchanges

|                  | Centralised (CEX)                          | Perp DEX                                       |
| ---------------- | ------------------------------------------ | ---------------------------------------------- |
| **Account**      | KYC, email, password                       | Connect a wallet                               |
| **Custody**      | The exchange holds your funds              | On-chain, per the protocol's rules             |
| **Transparency** | Internal ledger                            | Positions and liquidations on-chain            |
| **Access**       | Can be geo-restricted, can freeze accounts | Permissionless                                 |
| **Liquidity**    | Deep, concentrated                         | Growing, but **fragmented across many venues** |

That last row is the whole reason ryft exists.

## Before your first trade

* **Start small.** Small enough that a total loss on the position is an annoyance, not a problem.
* **Use low leverage while learning.** 2–3× leaves room to be wrong temporarily. 20× does not.
* **Know your liquidation price** before you open, not after.
* **Account for funding** on anything you hold overnight. It compounds.
* **A liquidation takes the whole position margin.**

None of this is financial advice. Perpetual futures are high-risk instruments, and most people who
trade them with leverage lose money.