Spot versus derivatives
Spot trading generally involves buying or selling the asset itself. Derivatives provide price exposure through a contract and may involve leverage, margin requirements, funding payments and forced liquidation. Legal availability varies by jurisdiction.
How funding rates work
Perpetual contracts may use periodic funding payments between long and short positions to keep the contract price near the reference market. Rates can change quickly; a positive or negative rate does not guarantee the next rate or predict direction.
Margin and liquidation
Initial margin opens a position; maintenance margin is the minimum required to keep it open. If account equity falls below the venue’s threshold, the venue may reduce or liquidate the position under its rules. Liquidation fees and insurance or auto-deleveraging mechanisms may apply.
Execution and venue risks
Thin liquidity, sudden gaps, outages, oracle or index disruptions and rapid price moves can worsen execution. Exchange custody also introduces operational and counterparty risks beyond price risk.
Risk controls to consider
Understand isolated versus cross margin, liquidation price assumptions, reduce-only orders and stop behavior. Avoid using funds needed for living expenses, and do not assume a stop prevents liquidation in all conditions.
Questions before trading
What is the contract multiplier? How is funding calculated? What triggers liquidation? Can the venue close positions during an outage? Which jurisdiction and legal entity serve you? If you cannot answer, do not open a leveraged position.
Educational information only. This is not individualized investment, legal or tax advice. Trading leveraged products can cause substantial losses. Verify current terms with official sources.