If you trade perpetual futures, two numbers quietly decide more of your outcome than your entries do: the funding rate and your liquidation level. Both are simple once explained. Here's the beginner version, with tools to run your own numbers.
Funding rates: the cost of holding
Perpetual futures never expire, so exchanges use funding payments to keep the contract price near spot. Every interval (1 hour on Hyperliquid and Lighter, 8 hours on most exchanges like Bybit and Binance), longs and shorts pay each other:
- Positive funding → longs pay shorts.
- Negative funding → shorts pay longs.
The payment is your position size × the rate. A 0.01% rate sounds tiny, but at 8-hour intervals it compounds to roughly 11% per year — and in hot markets it runs far higher. For any multi-day hold, funding often costs more than your trading fees. Project it exactly with our funding calculator, and compare current rates across venues on the live funding page.
Liquidation levels: the point of no return
Liquidation is when your margin falls below the exchange's maintenance requirement and the position is force-closed — at a bad price, with a penalty. It is not a stop loss. The distance to liquidation depends mostly on leverage:
- 5x → roughly a 19% adverse move
- 10x → roughly 9.5%
- 20x → roughly 4.5%
- 50x → roughly 1.5% — inside the range of ordinary hourly volatility
If you can't state your liquidation price before entering, you haven't finished planning the trade. Our liquidation price calculator gives it in seconds for cross or isolated margin.
Putting them together
Before any perp trade, ask three questions:
- What's my liquidation price, and is my stop well above it? (If the stop and liquidation are close, a wick liquidates you anyway.)
- What will funding cost me over my expected hold? (Does my edge clear the carry?)
- What are my round-trip fees? Model them with the fee calculator.
Answer those and you've eliminated the two most common ways beginners bleed out on perps. Pick a low-cost venue — compare them on our exchange comparison, where signing up through our links can also cut your fees — and always size so a stop-out is survivable.
Read next: What Are Funding Rates in Crypto Perps? and How to Avoid Liquidation in Perp Trading.