Perpetual Futures Explained: Funding, Leverage and What a Perp Chart Screenshot Can and Cannot Show
Perpetual futures are futures contracts with no expiry date, kept near the spot price by a funding payment between longs and shorts. How funding works, what a liquidation is and how it shows on a chart, how to size around your stop, and what a chart screenshot grade can and cannot see.
A big share of crypto trading, as the iShares explainer below notes, is not people buying coins. It is people trading perpetual futures: contracts that track the coin's price, never expire, and let you use leverage. If you trade crypto off a chart, there is a good chance the chart in front of you is a perp chart, or that perp traders are moving the spot chart you are watching. This post covers what a perpetual future is, how the funding rate keeps it near spot, what a liquidation is and how it shows up as a candle, how to size a perp trade so the stop and not the leverage decides your risk, and what a screenshot grader can and cannot tell you about any of it.
Quick Answer
A perpetual future is a futures contract with no expiry date. Because it never expires, it cannot rely on settlement to bring its price back to the spot price, so it uses a funding payment instead: on a schedule set by the venue, longs pay shorts when the perp trades above spot, and shorts pay longs when it trades below. That payment is between traders, not a fee to the exchange, and its sign, size and interval vary by venue and over time. Perps are traded on margin, so they can be liquidated: when your margin falls below the venue's maintenance level, the position is closed for you, and a wave of those forced closes can print as a fast one-direction candle with a volume spike. Funding and liquidation data sit on the exchange, not on your chart.
General education, not investment advice. No funding rate on this page is a live or current figure. Every dollar amount is a made-up round number so the arithmetic is easy to check.
What Are Perpetual Futures?
A normal futures contract is an agreement on a price for a set month. It has a last trading day, and as that day gets close the contract price converges with spot. Traders who want to stay in roll: close the expiring month, open the next one. The beginner's guide to how futures work walks through margin, expiry and rollover on dated contracts if that part is new, and the micro vs E-mini futures breakdown shows how contract size and tick value work on dated index and commodity futures.
Perpetual futures contracts drop the expiry. The Wikipedia entry on perpetual futures describes them as contracts with no pre-specified delivery date that can be held indefinitely without rolling, settled in cash rather than by delivering anything. The same page notes they were first proposed by the economist Robert Shiller in 1992. They took off in crypto in the 2010s, and crypto perpetual futures are where most traders meet them today. Bitcoin perpetual futures are the best known (you will see BTC perpetual futures written with tickers like BTCUSDT perp or BTC-PERP, depending on the venue).
You never own the coin. You hold a contract whose profit and loss follows the coin's price, which is why shorting is as easy as going long: you just sell the contract. Here is perpetual futures vs spot vs dated futures in one place.
| Aspect | Spot | Dated futures | Perpetual futures |
|---|---|---|---|
| What you hold | The coin itself | A contract on the price, for a set month | A contract on the price, with no end date |
| Expiry | None | Yes, on a fixed date | None |
| What keeps it near spot | It is spot | Convergence: the price meets spot at expiry | Funding payments between longs and shorts |
| Cost of holding | None beyond fees (plus custody risk) | Built into the contract price; paid as a gap when you roll | Funding paid or received each interval |
| Leverage | None in a plain spot account | Yes, through margin | Yes, through margin, often offered at high multiples |
| Can it be liquidated? | No (without borrowing) | Yes, if margin falls short | Yes, automatically, when margin falls below the maintenance level |
| Going short | Needs a borrow | Sell the contract | Sell the contract |
| Roll gap on a continuous chart | None | Can appear at the switch between months | None, one contract the whole time |
| Settlement | You own the asset | Cash or physical, depending on the contract | Cash, through profit and loss and funding |
The perpetual futures vs futures difference comes down to two rows: expiry and what keeps the price honest. A dated contract meets spot at expiry; a perpetual is pulled toward spot by funding each interval. One more practical difference: a lot of perpetual trading happens on offshore or decentralized venues rather than regulated, centrally cleared futures exchanges, a point the iShares explainer on perpetual futures makes along with the risk that comes with it: who holds your margin matters.
How Does the Perpetual Futures Funding Rate Work?
Funding is the trick that lets a contract with no end date stay close to the real price. When buyers are more eager than sellers, the perp gets bid above spot. Funding turns positive and longs pay shorts. Being long now costs something, being short now earns something, and that pressure leans the perp back down toward spot. Flip it for a perp trading below spot: funding goes negative and shorts pay longs.
It is a payment between traders
The exchange sets the formula and the schedule, but the money moves from one side of the market to the other. That makes it different from a trading fee, which you pay on every fill regardless of direction. With funding, the same position can pay one week and get paid the next.
Sign, size and interval all vary
Each venue uses its own formula, usually built from how far the perp sits from an index of spot prices, often with a small baseline component on top. Many venues charge funding on a fixed schedule, every eight hours is a commonly cited interval, while others charge hourly or accrue it continuously. On many venues you pay or receive only if you hold the position at the funding time. All of that is set per venue and can change. The perpetual futures funding rate on the contract page right now is the one for the next interval; it can change, even flip sign, while you hold, and every interval you hold through counts.
What it costs, with a made-up rate
Say funding is 0.01% per interval (an invented number for easy arithmetic, not a quote of any venue's rate) and you are long a $10,000 position. Each interval costs $1. At 3 intervals a day that is $3 a day, and over 30 days it is $90. Funding is usually charged on the position size, not on the margin you posted, so leverage makes it bigger relative to your money. For an intraday trade closed before the next funding time it may not matter at all. For a swing hold it is a real cost, and it does not show on the chart.
Funding reduces the gap with spot but does not remove it. The iShares explainer linked above says perp prices can diverge from spot for periods of time. That is one reason the perp chart and the spot chart of the same coin rarely match tick for tick.
Illustrative only: funding and a liquidation candle
What Is a Liquidation, and What Does It Look Like on a Chart?
Perps are traded on margin. You post collateral (initial margin) that is a fraction of the position size, and the venue requires you to keep a smaller amount (maintenance margin) to stay open. When losses eat your equity down below that maintenance level, the venue closes the position for you. That forced close is a liquidation. Many venues measure this against a mark price, a reference built from spot prices across markets, rather than the last trade on their own book, so a single odd print does not necessarily liquidate you. Check how your venue defines it.
If you know stocks, compare it with a margin call in a stock account, where a broker usually asks for more money or sells your position when your equity drops below the maintenance requirement. On a perp, the close is automatic. Leverage multiplies the loss on the same move as much as the gain, and a liquidation can take the whole margin on the position.
Why liquidations come in waves
A liquidated long is a forced market sell. If price drops into a zone where lots of longs had their liquidation prices, those forced sells push price lower, which reaches the next layer of liquidation prices, which forces more selling. Liquidated shorts do the same thing upward, as forced buys. It is the same feedback loop as a short squeeze, where forced buying feeds itself, compressed into minutes. The iShares explainer also notes what happens on some venues when liquidation losses exceed the venue's own resources: auto-deleveraging, where certain profitable positions on the other side are reduced or closed to absorb the shortfall.
What it looks like on the chart
Often, a single fast candle in one direction with a long body and a volume bar several times the size of its neighbours. Sometimes the move snaps back within a few bars, leaving a long wick, which looks a lot like the pattern in the stop loss hunting write-up: a spike through an obvious level where orders cluster, then a reversal. Stops and liquidation prices tend to sit near the same obvious highs and lows. Fills during that candle are rough too, as the guide to slippage and gaps explains, so a stop inside that candle may fill well past its price.
What the candle cannot tell you is whether it was liquidations. A big seller, a news headline or a thin book can print the same bar. Liquidation data, if your venue publishes it, is on the exchange or a data site, not on the price chart. The chart shows the candle's shape, not what caused it.
How Do You Size a Perp Trade Around Your Stop?
Leverage is the setting people fiddle with first, and it is the wrong place to start. Size the same way you would size a stock trade, which the position sizing and risk per trade guide covers in detail: pick the dollar risk, let the chart put the stop, and the position size falls out.
Position size = dollar risk / stop distance (as a fraction of entry). With $100 of risk and a stop 2% from entry, the position is $5,000, whatever leverage you pick.
Leverage only decides how much margin you post for that $5,000 position, and how far price can move against you before the margin is gone. The table runs the numbers (computed in code). The last column ignores fees, funding and the maintenance margin, so a real liquidation happens before that move, not at it.
| Leverage | Margin posted | Loss if the 2% stop fills | Adverse move that erases the margin |
|---|---|---|---|
| 2x | $2,500 | $100 | 50% |
| 5x | $1,000 | $100 | 20% |
| 10x | $500 | $100 | 10% |
| 20x | $250 | $100 | 5% |
| 50x | $100 | $100 | 2% |
The loss at the stop is $100 on every row. Leverage did not change the risk. What it changed is the distance to liquidation. At 2x or 5x the margin survives a move far past the 2% stop. At 50x the margin is gone at the same 2% move as the stop, which means the liquidation, with maintenance margin and fees counted, sits in front of your stop and the stop never gets a chance to fire. The rule that falls out of this: your liquidation price, which the venue shows when you open the trade, has to sit well beyond your stop. If it does not, lower the leverage, not the stop.
Isolated vs cross margin
Isolated margin ties a set amount of collateral to one position, so a liquidation costs you that amount and stops there. Cross margin pools your account balance behind all open positions, which pushes the liquidation price further away but means a loss on one position can drain collateral from the others. The iShares piece flags exactly that cross-margin risk. Neither is safer by default. Isolated makes the worst case on one trade easy to see. Whichever you use, the stop is still what should end the trade.
The stop decides the risk. Check the chart that the stop comes from.
Upload the perp chart screenshot and SnapPChart grades that single image as a momentum continuation setup, long or short: structure, EMAs, VWAP, MACD and volume in frame, then an entry, a stop with its reasoning, and targets when the chart supports a trade.
Grade this chartReading a Perp Chart vs a Stock Chart
Most of what you know about reading a chart carries over. Trend, structure, moving averages and volume work the same way. A few things are different enough to trip you up.
No open, no close, no gaps
Crypto perps generally trade around the clock, every day. There is no opening bell, so there is no opening range and no overnight gap in the stock sense. Moves that would show up as a gap on a stock chart show up as one or two very large candles instead. The meme coin chart reading guide goes through the same 24/7 adjustments (percent-based stops, volume shape before price) on some of the most extreme charts in crypto.
No roll gap
A continuous chart of a dated futures contract stitches months together and can show a jump at the switch that never happened in the contract you held. A perp is one contract for its whole life, so its chart has no roll seam. That makes long lookbacks cleaner than on dated futures.
The volume is one venue's perp volume
The volume bars on a perp chart count contracts traded on that one contract on that one venue. The same coin trades on many spot pairs and many perp venues at once, so the bar is a slice of the activity, not all of it. Compare volume against the same chart's recent bars, not against a number you saw somewhere else.
Wicks that are about leverage, not news
Because so much perp exposure is leveraged, a modest move can trigger forced closes that stretch a candle further than the news or the order flow alone would. Long wicks through obvious levels show up often on perp charts. Give the stop room beyond those levels, and size down to pay for the room, rather than parking it exactly at the obvious high or low.
Want to see how a specific market reads as a chart? The BTC chart analysis page covers Bitcoin, the crypto chart analysis page covers coins generally, and the Hyperliquid (HYPE) chart page covers that token's spot and perp charts. The setup logic underneath is the same momentum trading approach used on stock charts.
What a Chart Screenshot Grade Can and Cannot See
SnapPChart reads one chart screenshot you upload. That is the whole input. It does not see funding rates, open interest, liquidation data, the order book or the venue's mark price, and it does not scan the market live. So the honest workflow is in two steps. Funding and liquidation data live on the exchange: check them there. Then upload the chart and grade the entry, stop and targets on what the picture shows.
What it does read off the picture: structure and levels, the EMAs, VWAP, MACD and the volume bars in frame. It grades momentum continuation setups, long or short, and does not take reversals. It returns a grade and one of three calls (take the trade, wait for a pullback, or skip it), and when the chart supports a trade, an entry, a stop with the reasoning behind its level, and targets. A fast liquidation candle in the frame is just a candle to it: part of the structure, not a forecast. The grade does not predict a liquidation cascade or a funding flip, and it is not a win rate.
Two things to know up front. Crypto is one of the instrument types graded on a scale capped at B, so a perp chart read as crypto tops out at B. That is a deliberate guardrail because the scoring was built on stock momentum, not a judgement on your chart. And when the chart is read as crypto, the position size calculator on the result works it like a stock: account size times risk percent, divided by the stop distance, shown as a share count, which for a coin means coin units. It has no input for leverage, margin mode or liquidation price, so the leverage and liquidation check from the sizing section above stays on you and the venue. The AI chart analysis page explains the screenshot grading in more depth, and the overview of AI in trading puts it alongside other uses of AI for traders.
A perpetual future is a futures contract with no expiry, kept near spot by funding that longs and shorts pay each other on the venue's schedule. It runs on margin, so a big enough move closes it for you, and those forced closes can print as fast one-direction candles on high volume. Size from the stop, then pick leverage low enough that the liquidation price sits well past it. Check funding and liquidation figures on the exchange, and use the chart for what the chart can show: the setup, the entry, the stop and the targets.
Frequently Asked Questions
Who pays the funding rate on perpetual futures?
Traders pay each other. When the perpetual trades above the spot price, funding is positive and longs pay shorts. When it trades below spot, funding turns negative and shorts pay longs. The exchange runs the schedule and the formula, but the money moves between the two sides of the market, so it is not a trading fee. How big it is, how often it is charged, and whether you pay only when you hold through a funding time all depend on the venue and change over time. The contract page on your exchange shows the current figure.
Are perpetual futures the same as CFDs?
No, though they feel similar from the outside. Both give you leveraged price exposure without owning the asset. A perpetual is an exchange-listed contract where longs and shorts trade against each other and funding keeps the price near spot. A CFD is usually a contract with your broker, priced off the underlying, with the broker charging an overnight financing cost. The chart can look identical. The counterparty and the cost structure are not.
Can you hold a perpetual future forever?
There is no expiry date, so in principle yes, as long as your margin holds up. In practice two things limit it. Funding is paid or received on every interval for as long as the position is open, which adds up on a long hold. And any position with leverage can be liquidated if price moves far enough against it. So there is no expiry, but funding and liquidation still put limits on how long you can hold.
Why is my perp chart slightly different from the spot chart?
Because they are two markets. The perpetual has its own order book and its own buyers and sellers, so its price can sit a little above or below spot, and funding is the mechanism meant to pull it back. The volume bars differ too: perp volume counts what traded on that one contract on that one venue, which can be larger or smaller than spot volume for the same coin. Wicks can also differ, since a burst of forced closes on the perp may not show up on the spot pair at the same size.
Does SnapPChart show funding rates or liquidation levels?
No. SnapPChart reads the chart screenshot you upload and nothing else. It does not see funding rates, open interest, liquidation data, the order book or the venue's mark price, and it never scans the market live. Check those on the exchange. What it grades is the setup the picture shows: a long or short momentum continuation, with an entry, a stop and targets when the chart supports a trade. Crypto charts are graded on a scale capped at B.
This article is for educational and informational purposes only and is not investment, financial or trading advice. Perpetual futures are leveraged and can be liquidated, and you can lose the whole margin on a position. The definition of perpetual futures as contracts with no delivery date, settled in cash, and the Robert Shiller 1992 origin are from the Wikipedia article on perpetual futures; the points that perp prices can diverge from spot for periods of time, that many perps trade on offshore or decentralized venues, and that cross-margin losses can spread across an account are from the iShares explainer on perpetual futures, both read in October 2026. The descriptions of funding formulas, funding intervals, mark prices, maintenance margin and liquidation mechanics are general knowledge; each venue sets its own rules and changes them, so check the contract page before trading. No funding rate stated here is a live, current or typical figure. The position, risk, stop and funding numbers are invented round numbers so the arithmetic can be checked. No exchange is recommended. No statistic, win rate or return is claimed for perpetual futures or for any strategy. SnapPChart grades a static chart screenshot you upload and returns a setup grade, a call and, when the chart supports a trade, an entry, stop, targets and reasoning for that single image; it grades long and short momentum continuation setups only, does not take reversals, caps crypto grades at B, and does not see funding rates, open interest, liquidation data, the order book or mark price.
Writes about AI-assisted day trading, technical analysis, and the systems traders actually use to stay disciplined.
Funding and liquidations live on the exchange. The setup lives on the chart.
Check funding and your liquidation price on the venue first. Then upload the perp chart screenshot and SnapPChart grades that one image as a long or short momentum continuation setup: a grade, a take, wait or skip call, and when the chart supports a trade, an entry, a stop with its reasoning, and targets. Crypto grades are capped at B. One skipped bad entry covers it.