When trading perpetual futures, you may notice multiple price metrics that differ slightly from the spot price. Understanding how these prices work is important for tracking unrealized PnL and managing risk.

Three key prices on the futures page

🚨 Important: On WEEX, unrealized PnL and liquidation are based on the mark price, not the last price.

Why is there a gap between futures and spot prices?

Futures and spot markets operate independently. Futures prices are more heavily influenced by short-term market sentiment because futures trading involves leverage. When bullish or bearish sentiment peaks, supply and demand dynamics in the futures market can deviate from the spot market, creating a price gap.

To prevent this gap from widening indefinitely, exchanges use the "Funding Rate" mechanism to anchor the perpetual futures price to the spot price over the long term.

How the funding rate anchors prices:

📈 When there is a premium (futures price > spot price)

• Market sentiment is strongly bullish.
• Funding rate is positive.
• Longs pay fees to shorts.
• More short positions enter the market, helping narrow the price gap.

📉 When there is a discount (futures price < spot price)

• Market sentiment is strongly bearish.
• Funding rate is negative.
• Shorts pay fees to longs.
• More long positions enter the market, helping narrow the price gap.

How do these prices affect your trading?

1. Liquidations are strictly triggered by the mark price to ensure fairness. TP/SL orders default to the last price, though you can manually switch the trigger type to the mark price based on your strategy.
2. The mark price is designed to be more stable than the last price. It helps prevent abnormal price spikes from triggering unnecessary liquidations.
3. When holding futures positions, funding fees are either paid or received at regular intervals, usually every eight hours. If you plan to hold positions for a long period, this cost can significantly impact your returns.
   
   

💡 Always check the current funding rate before opening a position to understand your holding costs. If the funding rate is high, the cost of holding a long-term position can add up quickly.

Risk disclaimer: Futures trading involves high risk and may result in the loss of your entire principal. This content is for educational purposes only and doesn't constitute investment advice. Trade responsibly and make decisions based on your own risk tolerance after fully understanding the risks involved.