What Is Perp Leverage?

How a small amount of money can control a much bigger position, for better and for worse.

First, what is a perp?

Leverage on Freeport lives on perpetual futures, or "perps." A perp is a contract that tracks an asset's price and lets you go long or short without ever owning the asset, and it never expires. A small recurring payment between traders, called funding, keeps its price tied to the real market. The contract is the vehicle; leverage is how big a position you drive on it. Everything below is about sizing that position.

What leverage actually means

Leverage lets you put down a small amount of money and control a much larger trade. It is written as a multiple: 2x, 10x, up to 50x on Freeport. The same multiple applies whether you go long, betting the price rises, or short, betting it falls. In plain terms, it sets how big your position is compared with the cash backing it.

A simple example

Say you have $100 and choose 10x leverage. You now control a $1,000 position. If the price rises 5%, that position gains $50, a 50% return on your $100. If the price falls 5% instead, you lose $50, half your money, on the same small move. Leverage multiplies every price move by the multiple you picked. The upside is larger, and the downside is larger in exactly the same proportion.

Your effective leverage does not stay put

The multiple you choose at entry is only a starting point. Once the trade is live, your effective leverage moves with it. As the price goes your way, your equity grows and your leverage quietly falls, so the position sits on firmer ground. As the price goes against you, your equity shrinks and your leverage climbs, which is exactly what pulls a position toward the edge. The number you set is not the number you carry.

Cross margin and isolated margin

The money you put down is your margin, the collateral for the trade, and you can post it two ways. With isolated margin, you fence off a fixed amount for one position; if that trade is liquidated, only the margin you assigned to it is lost, and the rest of your balance stays untouched. With cross margin, your whole account balance backs the position, so it can draw on your other funds to stay open through a rough patch. Isolated keeps the damage contained. Cross gives a trade more room to survive, at the cost of putting more of your account behind it.

Liquidation, explained plainly

When losses eat far enough into your margin, the position is closed for you automatically. That event is called liquidation. It exists so you cannot lose more than you committed, but it also means a sharp move can end a trade before it has any chance to recover. Higher leverage simply means that line arrives sooner.

The one rule to remember: higher leverage, smaller cushion

The higher your leverage, the smaller the move it takes to wipe you out. At 2x, it takes roughly a 50% move against you. At 10x, roughly 10%. At 50x, a move of only about 2% can liquidate the position. More leverage is not free buying power; it is a thinner and thinner cushion between you and that automatic close. Used well, it sizes a view you already hold rather than manufacturing a bolder one.

How Freeport helps

On Freeport you set your leverage before you enter, and pick cross or isolated on the same screen. Before you confirm, you see the full size of the position, the margin it requires, and how much room you have before liquidation. Nothing important is hidden until after the trade is on.