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By now, you've likely read our earlier articles about what Perpetual Futures (Perps) are and their risks and rewards. But to confidently step into the world of Perps trading — soon launching directly in Blum mini-app on Telegram — you need clarity around a few important terms traders use daily.
Instead of giving you confusing definitions, let’s dive deeper into each concept, explained simply with clear, relatable examples using current crypto prices (Bitcoin around $110,000, Ethereum around $3,500).
Long vs. Short Positions: Betting on Market Direction
When you trade Perps, you’re essentially making a bet about whether a cryptocurrency's price will rise or fall — without actually buying or selling the coin.
A long position means you expect the price to go up. If Bitcoin is currently trading around $110,000 and you believe it’ll soon hit $115,000, you'd open a long position. When Bitcoin rises as predicted, you profit.
In contrast, a short position means you're betting that the price will drop. Say Ethereum is at about $3,500, and you suspect it’s due for a decline. By opening a short position, you'll profit if Ethereum’s price falls to, for example, $3,300.
With Perps, you don’t need to own any tokens — you're simply trading based on your predictions of their price movements.
Leverage: Boosting Trades (and Risk)
One of the reasons Perps are popular among traders is the ability to use leverage. Leverage means borrowing funds from the exchange to amplify your trading size — effectively allowing you to open larger positions than your actual balance would normally allow.
For example, if you have $200 and use 10x leverage, your position becomes $2,000. Profits are multiplied — but so are losses.
However, risk doesn’t depend on leverage alone. It also depends on how much of your total balance is committed to the position. A low-leverage trade that uses most of your funds can be riskier than a high-leverage trade that uses only a small portion. That’s why it’s always important to check the estimated liquidation price before entering a trade.
As a beginner, it’s smart to start with small position sizes and low leverage (2x–3x) while keeping enough free balance to manage risk safely.
Margin: Your Trading Safety Net
When trading with leverage, margin is the money you set aside as collateral. It helps determine the size of your position and keeps your trade active.
There are two main types of margin: cross and isolated.
– Cross margin (used in Blum) means your available balance in Perp wallet is connected to your position.
If needed, extra funds from your wallet are automatically used to support the trade, giving it more room to stay open.
– Isolated margin means only the amount you assign to a specific trade is used.
For example, if you allocate $300 to a position, that’s the only amount involved — your remaining balance stays untouched.
Cross margin offers more flexibility, while isolated gives you tighter control over each trade.
Liquidation: What Happens When Things Go Wrong
The term liquidation can sound intimidating, but understanding it clearly helps you avoid it. Liquidation simply means your leveraged trade is automatically closed by the exchange when your losses become too big — surpassing your margin.
For example, let's say you open a long Ethereum trade at around $3,500, using 10x leverage. If Ethereum suddenly drops sharply (for example, to around $3,150 or lower), your trade may be liquidated. You’d lose your entire margin instantly.
To avoid liquidation, always use manageable leverage levels and set protective stop-loss orders (more on these below).
Funding Rate: Keeping Prices Balanced
You might’ve heard the term funding rate and wondered what it means. Funding rates are small periodic payments — usually every 8 hours — exchanged between long and short traders to keep the price of Perpetual Futures close to the actual market price (the "spot price").
If most traders are betting Bitcoin's price will rise (going long), the funding rate turns positive. In this scenario, long traders pay small fees regularly to short traders. If more traders are betting the price will drop (going short), the rate becomes negative — and short traders pay long traders.
These small fees are usually minimal per period — but can add up if positions are held for many days or weeks, so always check the funding rate when opening and holding positions.
PnL: Understanding Your Profit and Loss Clearly
PnL (Profit and Loss) is a simple but essential term. It shows the current status of your open trade — how much you've gained or lost so far.
Let’s say you open a Bitcoin trade worth $1,000 at $110,000 per BTC. If Bitcoin rises and your position’s value becomes $1,200, your PnL is $200 in profit. If the position's value drops to $900, your PnL is now a $100 loss. Always monitor your PnL closely.
Using Stop Loss and Take Profit Orders
Two terms every trader must understand clearly are stop loss and take profit.
A stop loss is an automatic safety mechanism you set when opening your trade. It will automatically close your position if the market moves against you to a certain extent — protecting you from losing more than you intended. For instance, if you enter a trade on Ethereum at $3,500 and set a stop loss at $3,400, your trade will automatically close if ETH hits $3,400 — limiting your losses.
On the flip side, a take profit automatically closes your trade at your chosen profit level. Using our earlier example, if you open a long Bitcoin position at $110,000, you might set your take-profit at $114,000. Once Bitcoin hits $114,000, your trade automatically closes — securing your profit without needing to constantly monitor the market.
Always set these two orders — they help you manage emotions, plan your trade clearly, and avoid impulsive decisions.
Positions: Your Active Trades at a Glance
Lastly, position simply means the trade you currently have open. If you're trading Ethereum expecting it to drop, you currently hold an active short position. If you're betting Bitcoin will rise, your open trade is a long position. Managing your positions is straightforward — especially within intuitive apps like Blum.
Why Understanding These Terms Matters Before Trading
You can't successfully trade Perpetual Futures without clearly understanding these essential terms. Crypto moves fast — and knowing how each of these terms impacts your trade will help you react quickly, clearly, and calmly when trading.
Perps Trading Coming Soon to Blum Mini-App
As previously mentioned in our other Perps articles, Blum is making Perpetual Futures even more accessible by launching trading directly within Telegram soon.
You’ll soon be able to:
– Easily open long or short positions
– Clearly see your PnL and manage positions instantly
– Set stop-loss and take-profit orders quickly
– Use leverage safely with clear guidelines
Blum mini-app on Telegram is designed to simplify your trading experience — so whether you're placing your first or your hundredth trade, the process remains intuitive and stress-free.
Final Tips for Safe Trading
– Begin trading Perps with minimal leverage
– Always use stop-loss orders for protection
– Monitor funding rates regularly
– Trade only with funds you can afford to lose
With these terms clearly understood, you're ready to confidently take the next step when Blum launches Perps trading. Stay tuned — it’s just around the corner.
