Perpetual futures risk management starts with the amount you can lose, the position size, and the rules that govern your margin. A stop-loss order can help you exit. It cannot fix the final loss in advance.
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This guide separates account capital, margin, position notional, and planned loss. The numerical examples are hypothetical. They show calculations, not a tested trading system or a recommended allocation.
Key takeaways
- Calculate price exposure from position size before you select leverage.
- Treat loss at a stop as an estimate that excludes execution failure unless you model it separately.
- Add funding payments in dollars before you divide by portfolio notional or capital.
- Review shared collateral, related positions, and venue access as separate risks.
Separate Capital, Margin, and Position Size
Account capital is the money available to support your trading. Margin is collateral assigned to a position or shared account. Notional value is the full reference value of the position.
Suppose you have $50,000 in trading capital. You open a $10,000 linear perpetual futures position with $1,000 of initial margin. Initial leverage is 10x because $10,000 divided by $1,000 equals 10.
A 5% adverse price move produces a $500 gross loss if position quantity stays constant. That equals 1% of account capital and 50% of initial margin. Fees and funding change the result.
The $1,000 margin requirement does not mean that you chose a $1,000 stop loss. The $500 planned loss does not establish your liquidation price. Maintenance margin, collateral value, other positions, and venue rules affect liquidation.
Calculate a Planned Position Size
A stop-based calculation starts with a chosen dollar loss and distance from entry to the intended exit price.
A wider stop means a smaller planned position
A stop order does not guarantee its execution price or the maximum loss.
Position notional = planned price loss / stop distance as a decimal.
For the hypothetical $50,000 account, a chosen 1% loss budget equals $500. With a 5% stop distance, the calculation gives $10,000 of notional: $500 / 0.05.
This estimate assumes a linear contract and execution at the stop price. It excludes fees, funding, and slippage. Slippage is the difference between the expected and actual execution price.
If you reserve $100 of the same budget for costs, $400 remains for the price move. At a 5% distance, the planned notional falls to $8,000. Actual costs can exceed the reserve.
The 1% figure is an example choice. No universal percentage makes a trade safe or profitable. Account needs, market liquidity, and the ability to absorb loss differ between traders.
Use the position calculator for the arithmetic. Check its assumptions against the contract and your intended order.
Understand What a Stop Can Do
A stop-market order submits a market order when its trigger condition occurs. Its execution price depends on available liquidity and the venue's order rules. A stop-limit order submits a limit order, which can remain unfilled after a price gap.
Check the trigger price source before you place either order. For example, Hyperliquid's stop documentation specifies mark-price triggers. Its explanation also shows how a stop-limit order can miss a fast price move.
The mark price is a venue reference used to value positions. It can differ from the latest trade price or the price available for your order.
Check stop quantity after a partial fill or position change. A fixed-size stop can leave some exposure open. A reduce-only setting limits an order to reducing an existing position.
Do not treat the stop price as a loss guarantee. Network failures, price gaps, rejected orders, and limited liquidity can prevent the expected exit.
Review the Margin Mode
Cross margin lets several positions use shared collateral. A loss in one position can reduce the support available to other positions. Isolated margin assigns collateral to a specified position under the venue's rules.
Where the collateral can be used
Cross margin
A loss can reduce the collateral supporting other eligible positions.
Isolated margin
$6,500 remains outside these two isolated allocations.
Hyperliquid's liquidation documentation distinguishes cross and isolated liquidation outcomes. It also explains why funding and other positions can change a displayed liquidation estimate.
Read the exact rules for your venue. A balance elsewhere in your wallet might not support an open position. Funds on another venue might be unavailable when you need them.
The cross versus isolated margin guide explains the distinction. Use the venue's own account display for current margin requirements.
Measure Portfolio Exposure
Track three different totals: position notional, collateral in use, and the planned loss across open trades. A margin-use percentage describes capital allocation. It does not measure the loss from a common price shock.
Suppose three long positions each have $10,000 of notional. Total gross notional is $30,000. If all three prices fall 10%, the combined gross loss is $3,000, assuming constant quantities and linear payoffs.
Different asset names do not guarantee independent returns. Several crypto longs can lose together. A long and short in different assets can also lose together if the relative prices move against both positions.
Test explicit scenarios instead of applying an unsupported correlation threshold. Include a common price decline, a single-asset move, and a fall in collateral value. Record which balances each scenario can affect.
Cash reserves can give you more choices. Adding margin still increases the funds exposed to a position or venue. Decide whether a planned response is to reduce exposure, add collateral, or exit.
Add Funding Costs Correctly
Funding is a payment between the two sides of some perpetual futures markets. Rates and settlement intervals vary. Some pool venues charge borrow fees under a different model.
Compare payments over the same window
0.00125% × 8 = 0.01%
Assume three long positions each maintain $10,000 of notional. Each pays 0.03% at every eight-hour settlement. These are fixed hypothetical assumptions for this calculation.
| Measure | Calculation | Cost |
|---|---|---|
| One position, one settlement | $10,000 × 0.0003 | $3 |
| One position, three settlements | $3 × 3 | $9 per day |
| Three positions, one day | $9 × 3 | $27 |
| Portfolio daily cost | $27 / $30,000 | 0.09% of notional |
| Seven days at the same assumptions | $27 × 7 | $189, or 0.63% of notional |
The $27 daily cost equals 0.054% of the hypothetical $50,000 account. It equals 0.9% of margin if the three positions use $3,000 in total margin. Name the denominator whenever you express a cost as a percentage.
Actual payments change when the rate, quantity, or reference price changes. Hyperliquid settles funding hourly and uses its oracle price for payment notional. An eight-hour comparison rate is not necessarily an eight-hour payment schedule.
Use the funding comparison to inspect rate units and timestamps. Use settled account records to calculate the funding you actually paid or received.
Choose Review Limits Without Claiming a Proven Rule
A drawdown is a decline from a previous account value peak. A daily loss limit can serve as a decision to pause. It cannot prevent an open position from losing more before you exit.
Define whether a review limit includes open losses, trading fees, and funding. Specify the start time and time zone for daily measurements. Account deposits and withdrawals must not appear as trading gains or losses.
A reward-to-risk ratio compares an assumed target gain with an assumed loss. At a 2:1 ratio, the mathematical break-even win rate is one-third before costs. That result assumes every win and loss has the stated size.
It does not show that a strategy achieves those outcomes. Partial exits, gaps, missed orders, and funding can change both sides of the calculation.
Include Venue and Emergency Risk
A smart contract is code that runs on a blockchain. Bugs, administrative access, price-data failures, and withdrawal restrictions can affect funds even when a trade moves in your favor.
An audit applies to a specified code version and scope. It does not establish that a venue has no exploit risk. Read incident reports and current operating notices alongside audit reports.
Record your position-closing procedure and withdrawal dependencies before an emergency. Include required wallet access, network fees, and supported collateral. A plan cannot guarantee that withdrawals or order execution will remain available.
Splitting funds across venues can reduce dependence on one operator. It also adds transfers, account management, and separate margin requirements. No fixed allocation removes these risks.
Keep a Record You Can Check
For each trade, record the intended quantity, entry, exit condition, margin mode, and planned dollar loss. After closing, record actual fills, fees, funding, and any failed orders.
Compare the planned loss with the actual loss. Separate a calculation error from an execution failure or a decision to change the plan. Review repeated differences before increasing position size.
The liquidation guide covers forced position closure in more detail. A clear record helps you identify which risk control needs attention.
What is the 1% rule in perpetual futures trading?
It is a chosen loss budget equal to 1% of account capital.
A stop-based calculation estimates position size from that budget. Actual losses can exceed the estimate.
How many positions should I hold at once?
A position count does not measure portfolio risk.
Compare total notional, shared collateral, and losses under common price scenarios.
Do stop-loss orders cap my loss?
No.
A trigger submits an order under venue rules. Slippage, price gaps, rejected orders, or failures can produce a larger loss.
What should a daily loss rule specify?
Specify the measurement period, included costs, treatment of open losses, and the action you plan to take.
A review limit is not an execution guarantee.
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