Perpetual Futures: Funding, Mark Price and Liquidation
Perpetual futures explained: how perps work, funding rates, mark price, margin and liquidation, with examples, and how PnL World tournaments use them.
Perpetual futures ("perps") are futures contracts with no expiry date. They let you go long or short on an asset such as Bitcoin with leverage, and hold the position for as long as you like. They are the most traded instrument in crypto — and the instrument every PnL World tournament is traded on.
This guide explains the four mechanics that decide your result on a perp: leverage and margin, mark price, funding and liquidation.
Perpetual vs regular futures
| Regular (dated) futures | Perpetual futures | |
|---|---|---|
| Expiry | Fixed date | None |
| How price stays near spot | Converges at expiry | Funding payments between longs and shorts |
| Rolling needed | Yes, before expiry | No |
| Typical market | Commodities, indices | Crypto |
1. Leverage and margin
On a perp you post margin and control a larger position size. With 10× leverage, 10,000 of margin controls a 100,000 position.
- A 1% move in price is roughly a 10% move on that margin.
- Leverage multiplies gains and losses equally — it does not change the odds of a trade.
What matters for your account is the position size relative to your equity, not the leverage number on the screen. More in leverage in trading.
2. Mark price
Exchanges use two prices:
- Last price — the price of the most recent trade.
- Mark price — a fair-value price derived from the spot index, used to value open positions and trigger liquidations.
The mark price protects traders from being liquidated by a single spike or thin moment in the order book. Your unrealized PnL and your liquidation are both calculated on the mark price.
3. Funding
Because a perp never expires, something must keep its price close to the spot price. That is funding: a periodic payment between longs and shorts.
- When the perp trades above spot, the funding rate is positive: longs pay shorts.
- When it trades below spot, the rate is negative: shorts pay longs.
- Funding is paid on the position's notional size at fixed funding times — on major Binance perpetuals, usually every 8 hours.
- You pay or receive funding only if you hold a position at the funding time.
Example: a 100,000 long with a funding rate of +0.01% pays 10 at the funding time. Small per period — but it adds up over days and weeks, which is why it matters most in long tournaments.
4. Liquidation
If losses eat through your margin to the maintenance margin level, the position is liquidated — closed by the engine at the mark price. Higher leverage puts the liquidation price closer to your entry.
| Leverage | Approx. adverse move to liquidation* |
|---|---|
| 2× | about 50% |
| 5× | about 20% |
| 10× | about 10% |
| 20× | about 5% |
*Rough guide before fees and maintenance margin; the exact level depends on the market's risk tiers and is shown on the position.
5. Fees
Perps charge a taker fee on orders that take liquidity (market orders) and a lower maker fee on orders that add liquidity (resting limit orders). Fees are charged on the notional size, so leverage multiplies them too.
How perps work in PnL World tournaments
- Markets: a basket of five perpetuals — BTC, ETH, SOL, XRP and BNB — on live Binance prices.
- Every trader starts with 100,000 Credits; leverage is capped at 20× in Hourly, 4-Hour, Daily and Weekly tournaments and 10× in PnL Monthly, PnL Quarterly and the PnL World Championship.
- Market orders fill against the live order book; limit, stop, take-profit and stop-loss orders trigger on live prices.
- Maker and taker fees and funding apply as on an exchange and are part of your result.
- Liquidation follows exchange rules on the mark price. A trader whom a liquidation leaves at 10% or less of the starting bankroll is marked Liquidated and ranks last.
- At the end, open positions are counted as if closed at the mark price, including the exit fee.
Full details: official rules · how tournament results are scored.
FAQ
Why are they called perpetual? Because they never expire — you can hold the position indefinitely, as long as margin allows.
Can I lose more than my margin on a perp? On exchanges, liquidation closes the position before the margin is fully lost in normal conditions. In a PnL World tournament, nothing is opened on an exchange and no real money is at risk.
Is funding a fee to the exchange? No. Funding is paid between traders — longs and shorts — not to the exchange.
Do I pay funding if I close before the funding time? No. Only positions open at the funding time pay or receive it.
PnL World tournaments are simulated: trades are executed against live market data, but no real-money positions are opened on any exchange. Nothing here is financial advice.
Next: Leverage in trading · What is PnL in trading? · Crypto trading tournaments