What Are the Key Mechanisms and Terms Behind Perpetual Futures Trading?

The core mechanism behind perpetual futures trading is the funding rate — a periodic fee exchanged between Long and Short traders that keeps the perpetual contract price aligned with the index price. On Pluang, funding is exchanged every eight hours and can be positive or negative depending on which side of the index price the perpetual contract is trading. Every Crypto Futures contract on Pluang is perpetual only, meaning it has no settlement date and never expires the way a traditional dated futures contract does — funding is precisely the mechanism that substitutes for expiry in keeping the contract price honest against the underlying market. Alongside funding, Mark Price is the other core mechanism worth understanding: it's a weighted average price across major global exchanges used for unrealized PnL and liquidation calculations, and it's distinct from the last traded price on Pluang's own order book, which only reflects Pluang's local supply and demand.

Key components:

• Purpose — the funding rate exists to prevent the perpetual contract price from drifting too far from the index price. When the gap widens, funding rate payments push traders toward positions that help close that gap.
• Positive funding rate — happens when the perpetual is trading above the index (spot-referenced) price. Long traders pay the fee to Short traders.
• Negative funding rate — happens when the perpetual is trading below the index price. Short traders pay the fee to Long traders.
• Funding is exchanged directly between traders holding opposing positions on the contract, based on prevailing market direction, every eight hours without exception.
• Mark Price vs. last price — Mark Price is the weighted-average benchmark used for PnL and liquidation triggers, while last price simply reflects the most recent trade on Pluang's own order book — the two can diverge briefly during volatile moves, which is why liquidation is judged against Mark Price rather than the order book's last traded price.
• Perpetual-only structure — since there's no expiry date to force convergence with the spot market, funding rate is the mechanism that does that job continuously instead of at a fixed maturity date.

Related questions:

Q: What is the funding rate in perpetual futures trading?
It's a periodic fee exchanged between Long and Short traders on a contract, designed to keep the perpetual contract price aligned with the index price. It substitutes for the price-convergence role that an expiry date would otherwise play on a dated futures contract. Since every Crypto Futures contract on Pluang is perpetual with no settlement date, funding is the ongoing mechanism doing the job that expiry would normally handle elsewhere.

Q: How often is the funding rate paid?
Every eight hours, with the amount and direction determined by how far the perpetual contract price has diverged from the index price. This schedule runs continuously regardless of the day or time, since Crypto Futures markets never close, so a position held across multiple eight-hour windows accumulates or pays funding at each interval it remains open, whether that's during business hours, overnight, or on a public holiday.

Q: What does a positive funding rate mean?
The perpetual price is trading above the index price, so Long traders pay the funding fee to Short traders. This tends to happen when bullish sentiment pushes the perpetual price above the underlying spot-referenced benchmark. Holding a Long position during a positive funding period means you're the one making the periodic payment, which is a cost worth factoring into your overall position planning.

Q: What does a negative funding rate mean?
The perpetual price is trading below the index price, so Short traders pay the funding fee to Long traders. This reflects bearish pressure pushing the perpetual below the index it's meant to track. In this scenario, Short traders are the ones paying, while Long traders receive the funding payment, which can partially offset unrealized losses during a downtrend, with the exact amount set by the prevailing funding rate at that time.

Q: What is Mark Price and how does it relate to funding and liquidation?
Mark Price is a weighted average across major global exchanges, used for unrealized PnL and liquidation triggers, distinct from the last traded price on Pluang's own order book. It's the benchmark that determines whether your position gets liquidated, not the order book's most recent trade. During volatile moves, Mark Price and last price can briefly diverge, which is exactly why liquidation is judged against the steadier, exchange-wide Mark Price instead.