Take-profit and stop-loss orders on perpetuals
A take-profit (TP) closes a perpetual position when price moves in its favour to a set level. A stop-loss (SL) closes it when price moves against it to a set level. Both wait for a trigger price, checked against either mark price or last price, then send an order. Set as reduce-only, they can only shrink the position, never flip it.
This guide covers how they work, which trigger to use, and what P&L each level produces. Examples use illustrative prices.
How TP and SL orders work
Both are conditional orders. Nothing is placed on the book until the trigger is hit.
- You set a trigger price. For a long, the TP sits above entry and the SL below. For a short, the reverse.
- The venue watches the trigger. It compares the chosen reference price, mark or last, to your trigger.
- The trigger is hit. The venue sends a market order or a limit order, depending on how you set it up.
- The order fills, and the position closes in full or in part.
A trigger that sends a market order behaves like a stop-market. One that sends a limit order behaves like a stop-limit, with the same trade-off: price control in exchange for fill certainty. See market, limit, stop and stop-limit orders explained.
Worked example: a long with both levels
- Position: long 0.2 BTC perpetual
- Entry: $60,000.00
- Notional: 0.2 × $60,000.00 = $12,000.00
- Leverage: 10x, so margin = $12,000.00 ÷ 10 = $1,200.00
- Take-profit trigger: $63,000.00
- Stop-loss trigger: $58,500.00
If the take-profit fills at $63,000.00: P&L = 0.2 × ($63,000.00 − $60,000.00) = 0.2 × $3,000.00 = +$600.00 As a share of margin: $600.00 ÷ $1,200.00 = 50%
If the stop-loss fills at $58,500.00: P&L = 0.2 × ($58,500.00 − $60,000.00) = 0.2 × −$1,500.00 = −$300.00 As a share of margin: $300.00 ÷ $1,200.00 = 25%
The distance to the TP is $3,000.00 and to the SL is $1,500.00. The ratio of potential gain to potential loss is $600.00 ÷ $300.00 = 2 to 1. That ratio describes the orders. It says nothing about which level the price reaches first.
Adding fees
Assume a taker fee of 0.05% on entry and exit. Fee rates vary by venue.
- Entry fee: $12,000.00 × 0.0005 = $6.00
- TP exit notional: 0.2 × $63,000.00 = $12,600.00; fee $6.30
- SL exit notional: 0.2 × $58,500.00 = $11,700.00; fee $5.85
| Outcome | Price P&L | Fees | Net |
|---|---|---|---|
| TP fills at $63,000.00 | +$600.00 | $6.00 + $6.30 = $12.30 | +$587.70 |
| SL fills at $58,500.00 | −$300.00 | $6.00 + $5.85 = $11.85 | −$311.85 |
Funding payments, if the position is held across funding times, change these figures further. See perpetual futures funding rates, explained.
Where the stop sits relative to liquidation
Using the simple method in leverage, margin and liquidation, with a 0.5% maintenance margin rate, this position’s estimated liquidation price is about $60,000.00 × (1 − 0.10 + 0.005) = $54,300.00.
The stop at $58,500.00 sits well above it. If the stop fills near its trigger, the position closes before liquidation. A stop placed below the liquidation price would never get the chance to act. Treat any hand calculation as an estimate and use the venue’s figure.
Worked example: a short
- Position: short 2 ETH perpetual at $3,000.00
- Take-profit: $2,850.00 (below entry)
- Stop-loss: $3,090.00 (above entry)
TP fills: 2 × ($3,000.00 − $2,850.00) = 2 × $150.00 = +$300.00 SL fills: 2 × ($3,000.00 − $3,090.00) = 2 × −$90.00 = −$180.00
For a short, everything is mirrored. A rising price moves toward the stop. For why short losses behave differently from long losses, see long vs short positions.
Mark price vs last price triggers
Most venues let you choose which price the trigger watches.
- Last price is the most recent trade on this venue.
- Mark price is a reference value most venues derive from an index of spot prices on several venues. It is also what most venues use for liquidation.
The choice matters during a brief spike.
Example. Same long, SL at $58,500.00. A large sell order hits a thin book, and the last price wicks to $58,450.00 for a few seconds. The mark price, smoothed across venues, only reaches $58,600.00.
- SL on last price: triggers. The position closes near $58,450.00 or lower.
- SL on mark price: does not trigger. The position stays open.
Neither choice is right in every case. Mark triggers ignore short-lived wicks on one venue. Last triggers respond to the trades actually happening. For how these prices are built, see mark price vs last price vs index price.
| Trigger | Reacts to | Strength | Weakness |
|---|---|---|---|
| Last price | Trades on this venue | Fast, reflects real fills | Can fire on a brief wick |
| Mark price | Index-based reference | Resists one-venue spikes | Can lag the venue’s own trades |
Reduce-only
A reduce-only order can only make a position smaller. If it would increase the position or open one on the other side, the venue cancels or trims it.
Example without reduce-only. You hold the 0.2 BTC long with a 0.2 BTC stop. You close 0.1 BTC by hand, leaving 0.1 BTC. The price then hits the stop, which sells 0.2 BTC. The first 0.1 BTC closes the long. The second 0.1 BTC opens a new short.
Same case with reduce-only. The stop sells only 0.1 BTC, the size still open, and the position ends flat.
Many venues mark position-attached TP and SL orders reduce-only by default. Standalone conditional orders may not be. Check before placing them.
Partial take-profits
Traders sometimes split exits across several levels. With the 0.2 BTC long, a TP for 0.1 BTC at $61,500.00 and another for 0.1 BTC at $63,000.00 would give:
- First: 0.1 × ($61,500.00 − $60,000.00) = +$150.00
- Second: 0.1 × ($63,000.00 − $60,000.00) = +$300.00
- Total if both fill: +$450.00, before fees
Common mistakes
- Stop below the liquidation price. Liquidation reaches it first.
- Stop-limit with no room. In a fast fall, the limit can be skipped and the position stays open.
- Forgetting reduce-only. A stop larger than the position can flip it.
- Ignoring trigger type. A last-price stop can fire on a wick that the mark price never reached.
Related
Time-in-force settings affect the order a trigger sends; see time in force explained. For how margin mode changes what is at risk, read isolated vs cross margin.
Frequently asked questions
Is a stop-loss better triggered on mark price or last price?
It is a trade-off. Mark price is an index-based value that resists brief spikes on one venue, so a mark trigger is less likely to fire on a wick. Last price reflects actual trades on the venue, so a last trigger reacts faster but can fire on a short-lived spike.
What does reduce-only mean?
A reduce-only order can only decrease an existing position. If it would increase the position or open one in the opposite direction, the venue cancels or trims it. Take-profit and stop-loss orders attached to a position are often reduce-only by default.
Can a stop-loss prevent liquidation?
It can close the position before the liquidation price if it is placed between the entry and the liquidation price and fills in time. In a fast move, a stop-market can fill below its trigger and a stop-limit may not fill at all, so it is not certain protection.
What happens to the stop-loss when the take-profit fills?
On many venues, take-profit and stop-loss orders attached to a position are linked, so when one closes the position the other is cancelled. Standalone conditional orders may not be linked. Behaviour varies by venue.
Hippo provides information, not investment advice.
Part of our guide: Perpetual futures funding rates, explained
