Risks

Perpetual futures are a leveraged product. Most people who trade them lose money. This page lists the specific mechanisms by which that happens on KestrelPerps. None of it is softened, and none of it is offset by an upside claim. Read it before you fund a real account.

Leverage amplifies losses first

Leverage multiplies the move, not the direction. At 10x, a 1% adverse move takes 10% of your margin. At 25x, a 3.6% adverse move takes 90% of it. The gain case and the loss case are symmetric in percentage terms, but they are not symmetric in outcome: a loss reduces the capital you have left to trade with, so the same percentage gain afterwards returns less.

The liquidation column uses the demo threshold of 90% of margin. On real markets the number is set by the venue's risk engine and is usually tighter, because maintenance margin varies by asset and by position size. Treat the table as an order of magnitude, not a promise.

Liquidation

Liquidation is the normal outcome of a leveraged position that moves against you far enough. It is not an error and it is not a failure of the system. In the demo, a position closes when the loss reaches 90% of the margin, and the remaining 10% is returned to the balance.

On real markets the liquidation price you see on the position is the one that matters, and it moves as the position, the funding accrued and the maintenance requirement change. A position can be liquidated while you are asleep, while your connection is down, or during a move that reverses seconds later. There is no grace period and no appeal. See leverage and margin for the mechanics.

Thin markets move on a single trade

Many assets on Robinhood Chain trade in small pools. A pool with $100,000 of liquidity can be moved several percent by one order. That move is real: it prints, it is the price your position is marked against, and it can liquidate you even though nothing about the asset changed. It can be caused by another trader, by a bot, or by someone acting deliberately against open positions.

The leverage cap on each demo market is derived from that market's measured liquidity depth for this reason. A lower cap on a thin market is not a limitation, it is an acknowledgement that the price is easy to push. It does not make the market safe.

Volatility of the underlying

Two different volatility problems sit under these markets.

• Crypto assets can move tens of percent in a day, and small-cap tokens can lose most of their value in minutes with no warning and no recovery.
• Tokenized equities track instruments that gap. Earnings, guidance, halts and weekend news all produce jumps that no stop can sit inside. A perpetual on an equity does not close for the weekend, so the gap is expressed in the price you are marked against as soon as the pool reprices.

Funding drag

On real markets, funding is charged and received periodically between traders. It is not paid to us. If you hold the crowded side of a market, you pay it, repeatedly, for as long as you hold. A position that is flat on price can still bleed to nothing through funding if it is held long enough at high leverage, because funding is charged on notional, not on margin.

Funding is not charged in the demo. A strategy that looks profitable in the demo may be unprofitable once real funding is applied to it. See funding.

Execution, slippage and fees

There is no true market order. A market order is an aggressive immediate-or-cancel limit order priced through the book, with a default 5% slippage tolerance. In a fast market it can fill at the far edge of that tolerance, or fill only partially and cancel the rest, leaving you with a position size you did not intend.

• Orders are rejected for precision errors: size is rounded to the market's own size precision, price is limited to 5 significant figures and no more than (6 - size decimals) decimal places. This is the single most common cause of a rejected order, and a rejected order during a move is an unhedged position.
• Fees are charged on notional, not on margin. In the demo the taker fee is 0.06% on open and again on close, so at 25x a round trip costs 3% of your margin before the price has moved. Our fee on routed real volume is 1 basis point, 0.01%, on top of the venue's own costs.
• The demo fills instantly, completely, and without slippage, and does not model order book depth. Real fills do all three of those things worse.

Smart contract, bridge and infrastructure risk

Non-custodial means we never hold your funds. It does not mean your funds are safe. They sit in contracts, and contracts have bugs. Robinhood Chain is an Arbitrum-stack L2 with a sequencer, and an L2 can stall, reorganise or become unreachable while your position is open and moving.

• Collateral reaches the trading account through a bridge from a supported network. Bridges are a repeated source of total loss in this industry. This route is several steps and real friction, not one click, and every step is a place where funds can be sent to the wrong place irrecoverably.
• Prices in the demo come from live on-chain pool data refreshed roughly every 20 seconds. A stale or manipulated pool price is a stale or manipulated mark.
• A trading session key expires after 24 hours and can be revoked, and it cannot withdraw funds or send them to another address. It can still trade the account to zero, and it can move funds into a vault or sub-account. A leaked session key is dangerous. See security.
• Transactions on this chain, including the 0.01 ETH fee to open a new demo market and demo top-ups, are final. Sending to the wrong address loses the funds.

A tokenized equity is a token

Behavioural risk

The largest single cause of loss is the trader. The interface is fast by design: after one session authorisation there is no wallet popup per order, which removes the pause that would otherwise make you reconsider. That is a convenience and a hazard at the same time.

• Revenge trading after a liquidation, at larger size, is the most reliable way to turn a survivable loss into a total one.
• Demo profits are not evidence of skill. The demo has no funding, no slippage, no partial fills and free 10,000 to start. Sizing behaviour learned on money that is not yours does not transfer.
• Higher leverage feels like efficiency and behaves like a shorter fuse. The PERPS holder tiers raise the leverage ceiling. A higher ceiling is permission, not advice, and using it moves your liquidation closer.
• Averaging down on a leveraged position adds margin to a losing thesis and moves liquidation only a little, while increasing the amount you lose when it is reached.

Sizing, and money you need

There is no position size that makes leveraged trading safe. There is only a size at which being wrong does not matter to your life.

1. Fund the account with an amount you would be willing to see go to zero, in full, this week. Not an amount you expect to lose, an amount you can lose.
2. Decide the loss before the entry. Choose the number of dollars you are prepared to lose on the trade, then set margin and leverage so that the liquidation price sits beyond a move you consider plausible, not just past the last wick.
3. Keep the notional, not the margin, in mind. Fees and funding are charged on notional, so leverage raises your running costs even when you are right.
4. Do not use rent, tuition, medical costs, borrowed money or an emergency fund. Money with a deadline forces you to close at the worst time.
5. Trade the demo first, then trade small for longer than feels necessary. Size up only after a losing stretch you handled without changing your rules.

If you cannot state, before opening a position, what you lose when it goes wrong and whether you can absorb that, the position is too large. Nothing on this page is financial advice, and nothing about KestrelPerps reduces the risk that you lose everything you put into it.