What Are the Disadvantages of Perpetual Trading?
Perpetual trading's biggest drawback is leverage risk — a losing position can be liquidated entirely, wiping out the margin behind it, and under Cross Margin mode that forfeiture can draw on your entire shared Futures balance rather than being capped to a single position. Funding rates, exchanged every 8 hours, can also turn costly in certain market conditions, and managing margin requirements alongside liquidation risk demands careful, disciplined risk management rather than a passive approach, since Pluang's perpetual contracts never expire and won't close themselves for you. Margin Level itself is a rising scale from 0% to over 100%, and once it crosses roughly 50% an Initial Margin Call is triggered, followed by a Final Margin Call above 75%, both of which are early warnings that a position is drifting toward liquidation if left unmanaged.
Three trade-offs to weigh:
- Leverage magnifies liquidation risk — under Cross Margin, a loss isn't capped to one position; it can draw on your entire shared Futures balance, whereas Isolated Margin limits the forfeiture to that position's own margin.
- Funding rates aren't always cheap — the rate exchanged every 8 hours can become a recurring cost that eats into profitability, especially over longer holding periods.
- Margin and liquidation risk require active management — no expiration date means ongoing, careful risk management; an Initial Margin Call above 50% and a Final Margin Call above 75% both signal liquidation approaching.
Related questions:
Q: Can leverage cause me to lose my entire position?
Yes. If the market moves against a leveraged position far enough, it can be liquidated, and the margin backing it is lost. Under Cross Margin mode specifically, that liquidation can draw on your entire shared Futures balance rather than only the funds tied to that one position, which is a meaningfully different risk profile from Isolated Margin. This is one reason many traders choose Isolated Margin for higher-leverage positions specifically, since it contains the downside to a known, pre-allocated amount rather than leaving the rest of the account exposed.
Q: Are funding rates always cheap?
No. In certain market conditions, the funding rate exchanged every 8 hours can become a costly, recurring burden for the position holder. Holding a position open for days or weeks means paying this cost repeatedly rather than once, so a trade that looks profitable on price movement alone can still underperform once funding is factored into the total return. It's worth checking the current funding rate before opening a position meant to be held for a while, rather than assuming the cost will stay negligible for the full duration of the trade.
Q: Does perpetual trading require active risk management?
Yes. Managing margin requirements and liquidation risk requires careful, ongoing attention rather than a passive, set-and-forget approach. Watching your Margin Level for the point where it crosses roughly 50%, which triggers an Initial Margin Call, gives you an early warning before it reaches the Final Margin Call threshold above 75% and liquidation becomes imminent. Setting a personal alert well before the Initial Margin Call threshold, rather than waiting until the Final Margin Call stage, gives you more room to add margin or reduce the position size.
Q: What's the difference between Cross Margin and Isolated Margin when it comes to losses?
Cross Margin can draw on and forfeit your entire shared Futures balance if a position is liquidated, while Isolated Margin caps the loss to the margin allocated to that specific position. Choosing between the two is one of the clearest ways to control how much of your overall Futures balance is exposed to a single losing trade. Neither mode changes how liquidation itself is triggered — both still rely on Margin Level and Mark Price — the difference is purely in how much of your balance is at stake once it happens.