Perpetual Contracts Trading Guide

Step 1: Understanding Perpetual Contracts

Before you begin, please understand what a perpetual contract is. A perpetual contract is a derivative that lets you trade on the price of assets such as Bitcoin and Ethereum without holding the underlying asset. Its key difference from a traditional futures contract is that it has no expiry date: a position remains open until you close it voluntarily or it is liquidated. All profit, loss and funding fees are settled in cash (for example, in USDT); there is no physical delivery of the underlying asset.

The product has three core features. Leverage: you can open a position using margin that is less than the position value and thereby establish a larger position; gains and losses are scaled by the same proportion. Long and short: you profit when the price rises (long) or when it falls (short). Funding fees: a payment is exchanged between longs and shorts at set intervals to keep the contract price close to the spot market.

The following are the differences between spot trading and perpetual futures across various aspects:

• Ownership
  • Spot trading: you own the asset
  • Perpetual contracts: You hold a contract position only; you do not own the underlying asset
• Leverage
  • Spot trading：None（1x）
  • Perpetual contracts: Up to 5x for Retail Investors; up to 20x for Qualified and Institutional Investors
• Direction
  • Spot trading: Buy and hold (cannot short)
  • Perpetual contracts: Long or short
• Settlement
  • Spot trading: Delivery of the underlying asset
  • Perpetual contracts: Settled in cash; no asset is delivered
• Expiry
  • Spot trading: None
  • Perpetual contracts: None
• Funding fees
  • Spot trading: None
  • Perpetual contracts: Exchanged between traders at set intervals

Perpetual contracts operate much like traditional futures, with one key difference: there is no expiry or settlement date. Traditional futures can drift away from spot over time, whereas a perpetual continuously anchors its price to the underlying index through the funding-fee mechanism. Crypto-asset perpetuals support 24/7 trading.

Please note that leverage works both ways: it magnifies gains and magnifies losses by the same amount. At 5x leverage, an adverse move of roughly 4% reduces margin by about 20%; a larger move may lead to liquidation and the loss of the margin allocated to that position. The higher the leverage, the smaller the price move required to trigger liquidation.

Step 2: Account Activation and Funding

Perpetual contract trading must be enabled separately; it is not available by default. On your first visit to the perpetual contract trading page, select Enable Perpetual Contract Trading to begin the activation process. The system will explain that perpetual contract trading carries a high level of risk and ask you to review and acknowledge the Risk Disclosure Statement, the Investor Business Terms and the Additional Terms for perpetual contract products. The Accept button becomes available only after you have scrolled the relevant documents to the end.

You will then confirm a short statement on market volatility and margin risk, and you may set your default leverage at this step. Please note, however, that accepting the terms alone does not open an account. Your perpetual contract trading account is formally opened only after you complete the suitability questionnaire and are assessed as suitable to trade perpetual contracts. If you do not meet the suitability criteria, the account will not be opened and you must wait through a cooling-off period before retaking the assessment.

Once your account is open, use the transfer function to move funds into your perpetual contract account as margin. The trading interface will show your available balance and the margin available for long and short positions.

Step 3: Understanding the Three Prices on the Interface

When you open the trading interface, you will see three reference prices. Understanding how each price affects your position helps you avoid misjudgements.

The following are the three reference prices on the interface and what they mean:

• Index price: The fair value of the underlying asset, calculated as a weighted average across several major external exchanges and, where applicable, oracle feeds. If a source diverges too far from the others, its weight is temporarily removed.
• Mark price: The reference price used to calculate unrealised profit and loss and to determine whether liquidation is triggered. It combines multiple data sources to resist manipulation, so a single abnormal trade usually does not move the mark price.
• Last traded price: The most recent matched price on the order book. It reflects live market activity but may jump briefly when liquidity is thin.

The key point is that your unrealised profit and loss and your liquidation price are based on the mark price, not the last traded price. This design is intended to prevent a brief, isolated abnormal price move from causing unnecessary liquidation.

Step 4: Determining Position Size (Leverage and Margin)

Next, you need to determine position size. In the leverage settings, select a multiplier: Retail Investors may use up to 5x; the higher the leverage, the smaller the maximum size you can open. Leverage determines how large a position you can establish for a given amount of margin, while the notional value of the position (position size multiplied by the mark price) is your true market exposure.

For margin mode, HashKey Exchange MENA currently offers cross margin only, so all positions use cross margin; isolated margin is planned for a future release.

You also need to understand two types of margin. Initial margin is the margin required to open a position, equal to notional value divided by your chosen leverage; for Retail Investors, initial margin is at least 20% of notional value. Maintenance margin is the minimum equity required to keep a position open; once equity falls below that level, liquidation is triggered. Because initial margin is always higher than maintenance margin, a buffer remains between opening a position and liquidation.

Margin requirements are tiered: the larger the position, the higher the margin rate required and the lower the maximum leverage available. For Retail Investors, the 5x cap and the minimum 20%* initial margin apply regardless of position size. The full margin tier table for each contract is published on the Risk Limits page; please review it before increasing a position, as doing so may move the position into a tier with higher margin requirements.

Your main risk indicator is the risk ratio, which is always shown on the trading interface and reflects the ratio of maintenance margin to account equity. Maintenance margin is recalculated in real time (maintenance margin rate multiplied by current notional value), so this ratio changes as the market moves.

The following are the three risk ratio levels with corresponding status and action:

• Below 80%: Within the safe zone; normal trading.
• 80% to 99%: Warning. Add margin or reduce your position. You will receive in-app messages, push notifications and emails.
• 100% or above: Liquidation is triggered automatically.

The following example illustrates the mechanics. Suppose you are a Retail Investor with 10,000 USDT available, opening a 5x cross-margin Bitcoin long position (with no other positions), giving a notional value of 50,000 USDT, and assume the maintenance margin rate for this position is 0.5%.

• At entry, maintenance margin = 50,000 × 0.5% = 250 USDT, so the initial risk ratio = 250 ÷ 10,000 = 2.5%, which is within the safe zone.
• If Bitcoin falls 10%, you lose 5,000 USDT, equity falls to 5,000 USDT, notional value falls to 45,000 USDT and maintenance margin to 225 USDT, so the risk ratio rises to 225 ÷ 5,000 ≈ 4.5%.
• As the price keeps falling, equity decreases faster than maintenance margin, and the risk ratio rises sharply. A 5x long position is typically liquidated after an adverse move of roughly 19%–20%.

You do not need to calculate these figures yourself. The trading interface shows an estimated liquidation price for each open position and previews it before you place an order, so you can see your buffer before and after trading. The estimate updates as the market moves, as you add or reduce margin, and as funding fees accrue; however, it is only an estimate, and in volatile markets actual price moves may outpace what is shown on the interface.

Step 5: Placing Your First Order

Select the contract you wish to trade and review its rules on the details page. Then choose an order type; we recommend starting with a limit order so you can control your entry price. Enter the price and size, and set take-profit and stop-loss at the same time. If you expect the price to rise, select Buy (Long); if you expect it to fall, select Sell (Short), then confirm.

A good trading habit is to set take-profit and stop-loss when you place the order, rather than adding them after the position is already open, so you decide how much loss you are willing to accept before emotions affect your decision.

Step 6: Funding Rates While Holding a Position

After you open a position, a cost (or income) begins to accrue at set intervals; this is the funding fee, and the rate applied is the funding rate. Funding fees keep the perpetual contract price aligned with the spot index; they are settled directly between longs and shorts, and the exchange does not retain them.

• When the funding rate is positive, longs pay shorts. This usually happens when the contract price is above the index.
• When the funding rate is negative, shorts pay longs. This usually happens when the contract price is below the index.

Funding fees settle at fixed intervals throughout the day. Only traders holding a position at the settlement time pay or receive funding fees; if you open and close a position between two settlement times, no funding fee applies. Funding rates are capped to prevent extreme rates from having an excessive impact on positions.

For example, if you hold a long position with a notional value of 100,000 USDT and the funding rate is 0.01%, you pay 100,000 × 0.01% = 10 USDT; if the funding rate is −0.01%, you receive 10 USDT. The predicted funding rate for the next settlement and the full funding-fee history are shown on the trading interface.

While the position is open, in addition to funding fees, monitor unrealised profit and loss, your risk ratio, and your place in the auto-deleveraging (ADL) queue. When the risk ratio approaches the warning level, add margin or reduce the position promptly; do not rely on notifications alone, and monitor your risk ratio actively.

Step 7: Liquidation in Adverse Market Conditions

Liquidation is executed automatically by the system and may occur without any action from you; in volatile markets it may even be executed at a price worse than the mark price. When the risk ratio reaches 100%, the system automatically liquidates your position at the mark price. This is an automatic risk-control measure, not a penalty, and is intended to stop further losses before account equity becomes negative. There is no grace period before liquidation; the warning is your signal to act.

For you, the specific impact is as follows: you will lose the margin allocated to the liquidated position. In addition to the trading loss itself, the maintenance margin reserved for that position will be deducted as a liquidation fee. Because all positions currently share a single margin pool (cross margin), one liquidation may draw on the full available balance in your derivatives account, not only the margin notionally attributable to that position. The margin tiers on the Risk Limits page determine the maintenance margin requirement for a position and therefore your liquidation price.

Your loss cannot exceed the margin committed to that position. If a liquidation leaves your account equity negative, the Insurance Fund covers the shortfall and you are not required to deposit additional funds to make up the liquidation loss.

In practice, the liquidation engine closes positions in a way designed to minimize market impact; any shortfall beyond the bankruptcy price (the price at which account equity reaches zero) is absorbed by the Insurance Fund, and auto-deleveraging (ADL) is used only as a last resort. When the Insurance Fund is insufficient or circuit-broken, the system partially liquidates the most profitable counterparty positions (ranked by a combination of profit and effective leverage, applied equally to all investor types). The trading interface provides a real-time indicator showing your place in that queue. These mechanisms protect the wider market and do not change the personal impact described above.

Step 8: Closing and Settlement

In most cases, you will close a position voluntarily before liquidation is triggered. You may close manually with a market or limit order, or your previously set take-profit or stop-loss may close the position automatically. After the position is closed, realised profit or loss is recorded after fees and funding fees are deducted. You may then transfer assets back to your spot account.

At this point, you have completed the full life cycle of a first perpetual contract trade: activation, funding, understanding prices, setting leverage and margin, placing an order, holding the position (including funding fees), and closing and settlement. The same logic applies to every subsequent trade.

Step 9: Live Data and Rules

The parameters in this article are examples for illustration only. When you actually trade, the live data and rules on the following pages govern.

Live data and rules description:

• Funding rate: The predicted funding rate for the next settlement, and the full funding-fee history.
• Insurance Fund: Current and historical fund balances, and circuit-breaker status.
• Index: Index price, mark price, and the premium used to calculate funding fees.
• Trading rules and margin: Full trading specifications and margin tier tables for each contract.

Step 10: Risks You May Face with Perpetual Contracts

After completing the first nine steps, you understand the basic trading flow; what matters more is knowing where losses can come from. Perpetual contracts are high-risk leveraged products and are not suitable for everyone. You may lose money quickly, and your loss may equal the entire margin allocated to a position. The main risks are set out below.

The following are the main perpetual contract risks and their meaning:

• Leverage: Losses are amplified. In cross-margin mode, a loss on one position can consume margin reserved for your other positions.
• Liquidation: Once the risk ratio reaches 100%, liquidation may be triggered, and execution may occur at an unfavourable price, without any action from you.
• Funding fees: Holding a position through a funding settlement time results in a funding fee whose direction and amount may change.
• Liquidity and slippage: In volatile or illiquid markets, your execution price may differ from what you expected.
• Price gaps: Prices may move sharply and skip intermediate levels, including your stop-loss level.
• Collateral value: Non-cash collateral may fall in value and reduce your effective margin.
• Auto-deleveraging (ADL): If the Insurance Fund is insufficient or circuit-broken, profitable positions may also be liquidated.
• System and connectivity: System failure or connection interruption may prevent you from acting in time.
• Index and regulation: Changes to index sources or regulation may affect pricing, availability or terms.

If you trade perpetual contracts that track traditional assets (stock and commodity perpetual contracts), you face additional risks: liquidity is lower and slippage and spreads are wider outside regular trading hours; during weekends, holidays and other market-closed periods, some positions may be restricted to reduce-only orders and automatic liquidation processing may be paused or adjusted; in the initial phase no economic adjustment is made for corporate actions such as dividends or stock splits, and material events may lead to settlement, suspension or delisting; furthermore, these contracts do not represent ownership of the underlying stocks, indices or commodities, nor do they confer shareholder rights. Product-specific rules are set out in the Stock and Commodity Perpetual Contracts FAQ.

Past performance and historical market conditions are not a reliable guide to future outcomes. We recommend the following approach: use lower leverage and moderate position sizes, set take-profit and stop-loss on every trade, check funding fees and your risk ratio before holding positions for longer periods, and trade only with funds you can afford to lose.

Disclaimer

HashKey MENA FZE (“HashKey”) is authorised by the Dubai Virtual Assets Regulatory Authority (“VARA”) to provide Exchange Traded Derivative (“ETD”) Services in Dubai. VARA’s approval of HashKey to provide ETD Services does not constitute, and must not be construed as, an endorsement of (i) any specific ETD or (ii) any type or category of ETDs made available by HashKey.

Risks of ETDs

ETDs are complex, high-risk products and may not be suitable for all investors. Before trading any ETD offered by HashKey, you should carefully consider the following non-exhaustive risks:

• Risk of total loss – You may lose some or all of the funds you invest. In leveraged products, losses can exceed your initial deposit or margin.
• Leverage risk – Leverage magnifies both gains and losses; small movements in the underlying may result in disproportionately large losses and may trigger margin calls or the forced liquidation of your positions.
• Volatility of underlying virtual assets – Prices of the underlying virtual assets can be highly volatile and may move sharply against you, including outside trading hours.
• Liquidity risk – Market conditions may make it difficult or impossible to close a position at your desired price or at all.
• No guarantee of returns – Past performance is not indicative of future results. There is no assurance of any profit, return or capital protection.
• Counterparty, operational and technology risk – Including settlement, custody, systems, cyber-security and platform availability risks.
• Regulatory and legal risk – Changes in law, regulation or VARA requirements may adversely affect ETDs, their availability or their value.

Perpetual ETDs (perpetual futures) offered by HashKey

At this time, the ETDs made available by HashKey comprise perpetual ETDs (perpetual futures products), which are complex, leveraged derivative instruments and may not be suitable for all investors. Perpetual ETDs carry additional risks, including (on a non-exhaustive basis):

• Leverage and margin risk – Positions are traded on margin; adverse price moves can rapidly erode your equity and result in automatic margin calls, forced position reduction or liquidation.
• Funding and no-expiry risk – Perpetual ETDs do not have a fixed expiry date. You may be required to make or receive funding payments over an indefinite period, and cumulative funding, fees and spreads can materially affect returns even if the underlying price moves in your favour.
• Price dislocation risk – The price of a perpetual ETD may diverge, potentially materially and for sustained periods, from the spot price of the relevant underlying virtual asset or from prices on other venues, particularly in volatile or stressed markets.
• Close-out and liquidation risk – In stressed or illiquid markets, it may not be possible to open, reduce, hedge or close positions at your preferred price or at all; liquidation mechanisms, insurance funds and other loss-allocation tools may be applied, and you may suffer losses up to the full amount of collateral and other assets allocated to support your positions.

This statement does not describe all risks associated with ETDs or perpetual ETDs. Before entering into any ETD transaction, you should read the relevant product disclosures, terms and conditions, and the full risk disclosures for each specific ETD, including in particular the Additional Terms Applicable to Perpetual Futures Products and the Risk Disclosures for Perpetual Futures Products, and only trade if you fully understand the nature of the product and the risks involved and are able to bear the potential losses.

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*Specific parameters are subject to the official website announcement