Perpetual futures have taken over DeFi derivatives. No expiration dates, high leverage, and 24/7 trading—all without KYC or centralized custody. GMX pioneered sustainable on-chain perps, dYdX built an orderbook-based DEX, and Hyperliquid is pushing the performance frontier. This guide teaches you how to trade perps on-chain effectively.
We'll explain how perpetual futures work, compare the major platforms, break down funding rate mechanics, and share strategies for profitable perp trading. This is an advanced guide—understand spot trading before diving into leverage.
📑 What You'll Learn
- • How perpetual futures work
- • Major perp DEX platforms compared
- • Funding rates: how they work and how to profit
- • Position sizing and risk management
- • Perp trading strategies
- • Advantages over CEX perps
How Perpetual Futures Work
Perpetual futures (perps) are derivatives that track an asset's price without expiration. Unlike traditional futures with settlement dates, perps can be held indefinitely. A funding rate mechanism keeps the perp price anchored to the spot price.
Key Perp Concepts
Mark Price: The perpetual contract's current trading price.
Index Price: The underlying asset's spot price (often an average across exchanges).
Funding Rate: Periodic payments between longs and shorts to keep mark price aligned with index. If mark > index, longs pay shorts. If mark < index, shorts pay longs.
Leverage: Multiply your exposure. 10x leverage means $1,000 margin controls $10,000 position.
Liquidation: When losses approach your margin, the position is forcibly closed. Higher leverage = smaller moves trigger liquidation.
💡 Key Insight
Funding rates are the secret sauce of perps. During bull markets, longs often pay shorts 0.01-0.1% every 8 hours. That's 1-10% per week just for being short. Savvy traders use funding as a yield source or cost factor in position planning.
Interactive: Perpetual Position Calculator
Calculate position metrics, fees, and funding costs across different perp DEX platforms.
Arbitrum, Avalanche • Funding: Hourly
Margin
$10,000
Notional Value
$50,000
Entry Fee
$5.00
Daily Funding
$120.00
Liquidation at:~18.0% dropfrom entry price
Watch funding rates—positive rates mean longs pay shorts. During high bullish sentiment, shorting to collect funding can be profitable.
Major Perp DEX Platforms
GMX
Pioneer of the pool-based perp model. Traders trade against the GLP pool; LPs provide liquidity and take the other side.
Model: Pool-based (trade against GLP)
Max Leverage: 50x
Fees: 0.1% open/close
Funding: Hourly borrow fee
Chains: Arbitrum, Avalanche
Assets: BTC, ETH, + select alts
Pros: Zero price impact on entry/exit, no orderbook slippage, battle-tested
Cons: Limited assets, oracle-dependent, pool utilization limits
dYdX
Orderbook-based DEX on its own app-chain. Most similar to CEX trading experience.
Model: Orderbook (off-chain matching, on-chain settlement)
Max Leverage: 20x
Fees: 0% maker, 0.05% taker
Funding: 8-hour intervals
Chains: dYdX Chain (Cosmos SDK)
Assets: 100+ pairs
Pros: CEX-like UX, many assets, 0% maker fees, high throughput
Cons: Requires bridging to dYdX Chain, different trading model than GMX
Hyperliquid
High-performance L1 built specifically for perps. Pushing the frontier on speed and features.
Model: Orderbook (native L1)
Max Leverage: 50x
Fees: 0.01% maker, 0.035% taker
Funding: 8-hour intervals
Chains: Hyperliquid L1
Assets: 100+ pairs
Pros: Extremely fast, low fees, many assets, strong team
Cons: Newer platform, requires bridging, centralized sequencer
Platform Comparison
| Platform | Model | Fees | Best For |
|---|---|---|---|
| GMX | Pool | 0.1% | Zero slippage, simple |
| dYdX | Orderbook | 0-0.05% | CEX refugees, makers |
| Hyperliquid | Orderbook | 0.01-0.035% | Active traders, speed |
Funding Rate Strategies
Strategy 1: Funding Rate Farming
When funding is highly positive (longs pay shorts), open a short perp AND hold spot long. You're delta neutral but collect funding.
Funding rate: +0.05% per 8 hours
Daily funding: ~0.15%
Annual: ~55% APY
Position:
- Long 1 ETH spot (own the asset)
- Short 1 ETH perp (collect funding)
Net exposure: Zero (hedged)
Profit: Funding payments
Risks: Funding can flip negative. Liquidation on perp if price spikes before you adjust. Trading fees eat into profits.
Strategy 2: Funding-Aware Directional
Factor funding into directional trades. If you're bullish but funding is extremely positive, the cost of holding a long is high. Consider waiting or trading spot instead.
Strategy 3: Cross-Exchange Arbitrage
Funding rates differ across platforms. Short on high-funding platform, long on low-funding platform, pocket the difference. Requires capital on multiple platforms.
Risk Management for Perps
Position Sizing
Never risk more than 1-2% of your portfolio on a single trade. With 10x leverage, a 10% move wipes your position. Size accordingly.
Portfolio: $100,000
Max risk per trade: 2% = $2,000
Stop loss: 5% from entry
Max position size = $2,000 / 0.05 = $40,000
With 10x leverage, need $4,000 margin
Stop Losses on DEXs
Most perp DEXs support limit/stop orders. Use them. GMX has take-profit/stop-loss features. dYdX and Hyperliquid have full order types. Never hold leveraged positions without protection.
Leverage Guidelines
- 2-5x: Conservative, for swing trades
- 5-10x: Moderate, for confident setups with stops
- 10-20x: Aggressive, for scalps with tight stops
- 20x+: Gambling, expect liquidation
Frequently Asked Questions
Why use perp DEXs instead of Binance/Bybit?
No KYC, self-custody (your keys, your coins), censorship resistance, and no geographic restrictions. Trade-offs are lower liquidity and sometimes higher fees. For privacy-conscious traders, perp DEXs are essential.
How do GMX fees compare to orderbook DEXs?
GMX charges 0.1% (10bps) regardless of size. Orderbook DEXs charge less in fees but have slippage on large orders. For small trades, orderbooks are cheaper. For large trades without slippage concerns, GMX can be better.
Can I get liquidated from funding alone?
Theoretically yes, but it would take extreme funding rates over extended periods. More commonly, funding plus adverse price movement together cause liquidation. Monitor both.
Is perp trading taxable?
In most jurisdictions, yes. Profits from derivatives trading are taxable. The specific treatment (capital gains vs ordinary income) varies. Track your trades and consult a tax professional.
Continue Learning
Conclusion: Perps for the Self-Sovereign Trader
Perpetual DEXs represent DeFi's answer to centralized derivatives exchanges. Trade without KYC, maintain self-custody, and access leverage—all on-chain. The trade-offs (liquidity, complexity) are worth it for traders who value sovereignty.
Start with conservative leverage on well-established platforms. Understand funding mechanics before they eat your profits. Use proper risk management. And remember: the best traders aren't the ones who use the most leverage—they're the ones who survive long enough to compound.