Perpetual futures stay open until you close them, so they use funding instead of an expiry to help keep the contract near spot; if you need the background, see the difference between perpetuals, quarterly futures, and spot. This guide is for traders who may hold positions for hours or days and want to read funding alongside the testnet terminal, the market list, the play-money portfolio, and the play-money wallet. On ZK Futures, every balance is play money: a new account starts with 1,205.50 test USDT, and nothing on the site is an offer to trade.
Why perpetual futures need funding
A perpetual future is a derivative contract that tracks an underlying asset without an expiration date. Because there is no expiry, there is no final settlement date that naturally pulls the contract back toward spot.
That is the core difference from a dated future. A dated future has a fixed end date, so traders know there is a built-in moment when the contract and its reference market have to line up. A perpetual has to rely on an ongoing balancing mechanism instead.
That mechanism is funding. The funding rate is the percentage used to calculate recurring payments between traders who are long and traders who are short, based on position value.
The direction of the payment depends on the sign of the rate:
- positive rate: longs pay shorts
- negative rate: shorts pay longs
The purpose is simple. If the perpetual is trading rich relative to spot, paying funding can make long exposure less attractive to keep holding. If the perpetual is trading cheap relative to spot, paying funding can make short exposure less attractive to keep holding.
Over time, that running payment can influence positioning on both sides. Traders who keep paying may reduce exposure, while traders receiving funding may be more willing to hold. That pressure can help the perpetual stay closer to spot.
Funding helps steer the contract, but it does not lock the perpetual price to spot at every moment. The gap can widen or narrow, and the rate can change as market positioning changes.
How the funding payment is calculated
The basic formula is simple: funding payment equals position value multiplied by the funding rate at the settlement time.
Position value is the notional size of the position, not just the margin posted for it. That distinction matters because funding is calculated on the full exposure of the trade, not on the smaller amount of margin used to open it.
A quick example shows the arithmetic. A funding rate of 0.01% on a position worth 10,000 USDT is a payment of 1 USDT per settlement.
From there, the pattern is straightforward:
- Bigger position value means a bigger funding payment.
- Smaller position value means a smaller funding payment.
- The posted margin does not change that calculation by itself.
This is why two traders with different notional sizes can see very different funding amounts even if both used the same market and the same leverage setting. A larger notional position carries a larger funding payment, even when the margin behind it is relatively small.
In ZK Futures, funding is settled every 30 seconds in the demo, which is a short demo cadence compared with many exchanges that settle every 8 hours and some that settle every hour. That timing matters if you hold positions for hours or days, because a small rate can add up through repeated settlements. In other words, funding becomes part of the carry of the position over time, whether that carry is a cost paid or an amount received.
In ZK Futures, each settlement is capped at 0.1% of the position value.
The rate itself can be positive, negative, or close to zero. So at any given settlement, a position holder may pay funding, receive funding, or see very little effect. The direction and size of the payment depend on both the sign of the rate and the current position value at that moment.
Who pays whom, and why the sign flips
The funding sign answers one practical question: which side transfers USDT at the next settlement.
- Positive rate: longs pay shorts.
- Negative rate: shorts pay longs.
That sign usually reflects how the perpetual is sitting relative to spot at that moment. If the contract is above spot, the rate tends to turn positive so holding a long costs more into the next funding event. If the contract is below spot, the rate tends to turn negative so holding a short costs more instead.
Think of funding as a balancing payment, not as part of the trade entry itself. It does not open, close, increase, or reduce the position size. It is a periodic transfer between the two sides based on the position value at settlement time.
For a trader holding a position beyond a quick move, the important point is persistence. One settlement may be small, but the sign can stay positive or negative through many settlements in a row. Over hours or days, that repeated payment can become noticeable even when each individual rate looks modest.
It also helps to keep the sign in context:
- it shows who pays at that settlement
- it does not tell you whether the next price move is up or down
- it does not say whether a position is safe from liquidation
So when the sign flips, read it as a change in carrying cost from one side to the other, not as a forecast.
Funding, leverage, and liquidation risk over time
Funding becomes more important once you add leverage. Leverage is using a smaller amount of margin to control a larger position value. Isolated margin means only the margin assigned to that position is at risk for that position. With isolated margin, the initial margin equals position value divided by leverage.
That setup makes positions much more sensitive to price moves than a spot holding. The basic math is a useful shortcut:
- with 10x leverage, a 10% adverse price move uses up the initial margin
- with 100x leverage, a 1% move does
- with 2x leverage, a 50% move does
Those examples are simplified, but they show why small moves can matter quickly when leverage is high.
Funding adds another layer because it changes position equity at each settlement. Equity is the margin on the position plus unrealized PnL, adjusted by funding payments received or paid over time. If a position is already under pressure from an adverse move, repeated funding payments in the wrong direction can slowly weaken it further. If the position is receiving funding, those payments can reduce some of that pressure, though they do not remove price risk.
Maintenance margin is the minimum equity required to keep a position open. The mark price is the reference price used to value positions and determine unrealized PnL and liquidation. The maintenance margin rate is 0.5% of the position value at the mark price.
That means liquidation risk is not only about entry and exit. It also depends on how the position evolves between those points as the mark price changes and funding keeps settling. Over hours or days, a trader may see both forces at work at once:
- price movement changes unrealized PnL
- funding changes equity through repeated transfers
- leverage makes both effects matter more relative to posted margin
For traders holding perpetuals beyond a quick trade, funding is part of risk, not just a background detail.
How to read funding in a trading screen
Start by separating what changes now from what changes at settlement. The order book shows where bids and asks sit right now, while funding is a scheduled transfer that hits an open position at the next settlement time.
On the screen, read these items together:
- funding rate: the rate used for the next funding transfer between longs and shorts
- position value: the full size of the position in USDT that funding is applied to
- leverage: how much margin supports that position value
- mark price: the reference price used to value the position
- premium or discount to spot: whether the perpetual sits above or below the spot market
Then match that with your planned holding time. A position kept through many settlements can feel very different from one closed quickly, even if the entry and exit prices are similar.
If you want to practice the reading without real funds, ZK Futures lets you open BTC, ETH, SOL, DOGE, and PEPE perpetuals with play money and view ten price levels on each side of the book.
Common questions about funding rates
When is funding actually charged or paid?
Funding only affects a position at the settlement time, not every second the position is open. Until that moment, the posted rate is the rate for the next transfer between longs and shorts. If you close before settlement, that funding transfer does not hit that position.
Can funding change my liquidation risk?
Yes. Liquidation happens when position equity falls to the maintenance margin, which is 0.5% of the position value at the mark price. Equity is the margin on the position plus unrealized PnL. When funding is paid, equity goes down; when funding is received, equity goes up. That means funding can move a stressed position closer to liquidation or slightly farther from it.
How can I estimate the next funding amount quickly?
Use a short check:
- take the position value in USDT
- multiply it by the funding rate
- the result is the payment for that settlement
Example: 0.01% on 10,000 USDT is 1 USDT per settlement. In the demo, each settlement is capped at 0.1% of the position value.
Does higher leverage change the funding formula?
No. The formula still uses position value, not leverage. What leverage changes is how large that funding payment feels compared with the isolated margin behind the trade. At 100x, even a small repeated payment can matter more relative to posted margin than it would at 2x.
How can I practice this without real funds?
On ZK Futures, every balance is play money, and a new account starts with 1,205.50 test USDT. That makes it a simple place to watch how repeated funding settlements affect open perpetual positions over time without real funds.
Closing: funding is a carry, not a forecast
For positions held beyond a quick trade, funding is best treated as an ongoing holding cost or credit, not a clue about the next move. A positive rate only tells you longs pay shorts at settlement; a negative rate means shorts pay longs.
Before holding longer, keep three checks in mind:
- how often funding settles
- how large the position value is in USDT
- how little room isolated margin leaves before liquidation
ZK Futures is a testnet demo, and every balance in it is play money.