A futures contract is an agreement to either buy or sell a commodity at a future point in time for a predetermined price. Typically, this agreement also has a predetermined settlement date. A Perpetual Futures Contract, however, runs perpetually (in a way that never ends or changes). This means your settlement date on a perpetual contract is simply some time in the future and is completely at your discretion.
The contract/agreement is structured around two contract types: Long & Short. These contracts are agreements to buy or sell the underlying asset for the current market price at a future point in time.
Perpetual Long Contract: An agreement to buy the underlying asset at the current market price, some time in the future.
Perpetual Short Contract: An agreement to sell the underlying asset at the current market price, some time in the future.
When trading futures contracts, you do not need to own the underlying asset. This allows you to trade and profit from the performance of commodities, currencies, and other asset types without first acquiring the underlying asset. For example, Bitcoin Perpetual Futures Contracts can be used to trade contracts which represent the performance of Bitcoin (BTC) versus the U.S. Dollar (USD) without first owning Bitcoin. Similarly, Gold Perpetual Futures Contracts can be used to trade contracts which represent the performance of Gold (GOL) versus the U.S. Dollar (USD) without first owning Gold.
When trading traditional futures contracts, opening a Long position means you are agreeing to buy the asset at the current market price at some time in the future. Equal but opposite, opening a Short position means you are agreeing to sell the asset at the current market value some time in the future.
To open a long position, another trader must match your order with a short position. When this happens, you have opened an agreement/contract with another trader, you promise to buy at that price some time in the future, the other to sell at that price some time in the future.
If the asset then rises in value, the Long contract holder now has the option to buy the asset at the previously agreed upon price. Since the asset value has risen, the Long contract holder can buy the asset at a price lower than its current market price. This means the Long Contract has the potential to realise a profit. The trader with the short contract is now in a position where they have previously agreed to sell the asset at a price that is now lower than the current market. This means that they will be selling the asset at a price below the current market price, resulting in a loss. When this contract is settled or executed, the long contract holder realises profit and the short contract holder realises a loss.
On the Digitex Futures Exchange, all contracts are agreed upon using the DGTX tokens as the underlying currency. Both the profit and loss are realised in DGTX tokens. Contracts are placed in the same way, without owning the assets. As you do not own the underlying asset, profit and loss is simply based on the difference between the agreed price and the settled price.