Perpetual Trading Overview
Perpetual trading allows users to gain price exposure to an underlying asset without owning the asset itself. Instead of exchanging tokens directly, traders open positions through perpetual contracts that track market prices.
On AZX, perpetual trading is designed to provide deep liquidity, transparent pricing, and robust risk controls while remaining fully integrated with the shared AZ ecosystem.
What Are Perpetual Contracts?
Perpetual contracts are derivative instruments that mirror the price of an underlying asset but do not have an expiration date.
Key characteristics include:
No physical delivery of the underlying asset
Positions can be held indefinitely, subject to margin requirements
Profit and loss (PNL) is determined by price movements
Traders can take both long and short positions
Perpetual contracts enable traders to express market views efficiently without holding spot assets.
Core Components of Perpetual Trading
Perpetual trading on AZX is built on several interdependent mechanisms that work together to ensure fair execution, accurate pricing, and effective risk management.
Trading Mechanics
Trading mechanics govern how orders are matched, priced, and settled. This includes:
Order matching and execution
Price determination through index and mark prices
Position lifecycle and PNL calculation
These mechanisms ensure that trades are executed consistently and transparently across the AZ ecosystem.
Margin and Risk Management
Perpetual trading involves leverage and therefore requires a comprehensive risk management framework.
Key components include:
Margin requirements and leverage constraints
Liquidation mechanisms to manage downside risk
An insurance fund to absorb losses under extreme conditions
Auto-Deleveraging (ADL) as a last-resort risk control
Together, these systems protect both traders and the overall market from systemic risk.
Funding Mechanism
Perpetual contracts rely on a funding mechanism to anchor contract prices to the underlying spot market.
Funding payments are periodically exchanged between long and short positions based on market conditions, helping ensure that perpetual contract prices remain aligned with spot prices over time.
Relationship to Spot Trading
Unlike spot trading, perpetual trading does not involve direct ownership of the underlying asset.
Spot trading involves buying and selling actual tokens
Perpetual trading involves trading contracts that track price movements
Perpetual trading supports leverage and short positions
Spot trading does not involve liquidation risk
Understanding these differences helps traders select the trading method that aligns with their strategy and risk tolerance.
Navigating This Section
The following pages provide detailed explanations of each component of the perpetual trading system:
Order Types Explains the comprehensive set of order types and execution options
Trading Mechanics Explains how orders, prices, and positions are managed
Margin System Details leverage, margin requirements, and position maintenance
Funding Mechanism Describes how funding rates work and how payments are calculated
Liquidation Explains liquidation triggers and processes
Insurance Fund Covers the role of the insurance fund in risk mitigation
Auto-Deleveraging (ADL) Describes the ADL process and its role as a final safeguard
Summary
Perpetual trading on AZX combines flexible directional exposure with a robust, protocol-level risk framework. By integrating transparent pricing, shared liquidity, and layered risk controls, AZX provides a secure and efficient environment for trading perpetual contracts within the broader AZ ecosystem.
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