Paper trading perps: leverage, margin and funding

What is a perp, and how do you trade one with paper money on Trenches? After this page, you can open and close a paper perp on a computer or a phone, and know its risk and costs before you place it.

What is a perp?

A perp, short for perpetual contract, follows a market's price and has no end date. You never own what it follows. The lesson A contract with no end date teaches the idea.

You pick a side: a long gains when the price rises, and a short gains when it falls. The lesson What a long holds and what a short owes explains both.

You trade with paper cash, the practice money in your account. Each market's mark is its live price: a market order goes through at it, and liquidation uses it too.

The lessons named here sit further along the Crypto road, in sections 6 and 23 to 25. The road opens in order, and passing a section test on the course map lets you skip ahead.

How much can you lose?

Margin is the paper cash you put into a position, a trade you have open. On an isolated trade, explained below, you can lose all of it plus the opening fee, but no more.

Leverage multiplies what your margin controls. At 10x, $100 of margin controls a $1,000 position, so a 1 percent price move is a 10 percent gain or loss on your margin. The lesson Exposure and backing teaches the ratio.

Easy to mix up: margin and size. Margin is the cash you put in; size is the whole position it controls. A computer's ticket, the order form beside the chart, asks for the size. A phone's order sheet asks for the margin.

Each market has a maximum leverage: 100x for stock and commodity perps, and 500x for currency (FX) and index perps. Each crypto and Pre-IPO (private company) market has its own. FX perps are not the Forex tab, which stops at 30x.

Liquidation is a forced close. When an isolated position's loss reaches 90 percent of its margin, it closes and the margin is gone. The price where that happens is the liquidation price, and more leverage moves it closer, so read it before you place. Your position opens the unit on liquidation.

Say a coin trades at $100 and you open a 10x long with $100 of margin, a $1,000 position. If the price falls 9 percent to $91, you have lost $90, 90 percent of your margin. The position closes, and you lose the last $10 too. At 100x, a 0.9 percent fall would do it.

You can also set exits. A stop loss closes the position at a price against you, and a take profit at a price in your favor.

The margin mode decides what backs a position. Choosing a mode and One pool teach the two:

• Isolated, the default, risks only that position's margin.
• Cross lets the rest of your paper cash back the position too, so its liquidation price sits further away. The cost: a loss past the margin comes out of your cash.

What do funding and fees cost?

Funding is a payment between longs and shorts that pulls a contract with no end date toward the price it follows. Here it is paid or received every hour: your position's size times the market's hourly rate. When the rate is positive, longs pay shorts; when it is negative, shorts pay longs.

Say you hold a $1,000 long and the rate is 0.01 percent an hour. You pay $0.10 each hour, or $2.40 a day if the rate stays the same.

The header on a computer, and a market's About tab on a phone, show the hourly rate and the time to the next payment. Payments build up on the position and settle into your cash when you close it. The lesson Name the clock teaches you to read a funding schedule.

The paper fee is 0.05 percent of the position's size, not your margin, charged when it opens and again when it closes: $0.50 each time on a $1,000 position. The lesson Your exchange's fee schedule teaches fees on size. Unlike funding, the fee never pays you.

Slippage is the gap between the price you expect and the one you get. A paper market order goes through at the mark, so you pay none. The ticket's Slippage line only estimates what it would be on a real market.

Place an order on a computer

Click Trade in the sidebar, then Perps. Click the market's name above the chart, such as BTC-USDC, to open the market menu. Type in Find a market to filter it; each row shows its maximum leverage. Then fill in the ticket:

1. Click the margin mode button (Isolated until you change it), pick Isolated or Cross, and click Confirm.
2. Click the leverage button, set it in Adjust Leverage, and click Confirm. It starts at 10x, or at the market's maximum if that is lower.
3. Pick Market, which "Fills now at the mark price", or Limit, which "Fills at your price or better" and waits until the price reaches yours. For a limit, type a Price or click one in the order book, the list of orders waiting near the price.
4. Pick Buy / Long or Sell / Short.
5. Enter the Size in the coin or in dollars, shown as USDC (the unit button switches), or drag the slider.
6. For exits, tick Take Profit / Stop Loss. Fill in TP Price and SL Price, or Gain and Loss as a percent of your margin.
7. Read Liquidation Price, Order Value (the size in dollars), Margin Required, Slippage and Fees.
8. Click the button, such as Buy Long. It changes to Confirm: Buy Long, and the line under it says "Click again to place. Paper money only." Click again.

A market order lands in the Positions tab under the chart. A limit waits in Open Orders, its margin and fee held until it fills or you cancel.

Pro, beside Market and Limit, holds more order types; you can skip it at first, and Learn more explains each.

Place an order on a phone

Tap Trade, then Crypto, then Perps. Filter by All, Crypto, Stocks, Commodities, Indices, FX or Pre-IPO. Each row shows its maximum leverage. Tap a market, then:

1. Tap Long or Short to open the order sheet.
2. Type your margin, or tap $10, $50, $100 or $300. Leveraged size shows the position it controls.
3. Swipe the leverage wheel or tap a number, up to the market's maximum. It starts at 10x, or at the maximum if lower.
4. Tap Isolated to switch to Cross, and Market to switch to Limit. For a limit, tap a price 1, 2 or 5 percent below or above the price now.
5. Read the Liquidation price.
6. Tap Add SL/TP to set a stop loss and a take profit, as a price or a percent of your margin, then Save changes.
7. Read the fee line. It also estimates a day of funding.
8. Slide the knob along the bar, which reads Slide to long or Slide to short, or press and hold the bar.

A limit waits in the market's Orders tab until it fills or you tap Cancel order. On both devices, a limit order opens as Isolated when it fills, even if you picked Cross.

Watch and close a position

On a computer, a Positions row under the chart shows PNL (ROE %): your profit or loss, and its percent of your margin. Then come Liq. Price, Margin and TP/SL, where Add sets exits. To close now, click Market in the Close column, then Confirm close. Limit, beside it, closes at a price you set.

On a phone, the position card under the chart shows your margin, profit or loss, Liq. price and Funding so far. Edit TP/SL changes exits, and Close takes part or all of it.

Add margin, on the phone's card, moves cash into the position without changing its size, so leverage falls and the liquidation price moves away. Say you add $100 to a 10x position with $100 of margin: it becomes 5x.

A liquidated position's row in your history reads Liquidated. The position row and The positions teach you to read a row and its profit and loss.

Fees show in Trade History's Fee column and funding in Funding History on a computer, and in a market's History tab on a phone. The Your book card on your profile's Portfolio tab adds up both.

On a computer, the Paper Account card sums up your account. Your paper account: cash, positions and profit covers the rest.