Another important concept to get familiar with is unrealized and realized profit and loss (PNL). The unrealized PNL is based on the difference between the average entry price of a commodity and the market price of a said commodity. Equal to the underlying Index Price plus a decaying Funding basis rate to avoid market manipulations. The realized PNL is based instead on the difference between the average entry price and the price at which the commodity is sold. Realized PNL is based on where you can actually buy or sell your position. Which in most cases is not the marked price.
FAQ1: Why choose a mark price system?
So that no trader can cause unnecessary liquidations, which can occur under a Last Price marking system
FAQ2: How can I calculate my PNL quickly?
Unrealized Profit = ($1/Avg. entry price – $1/mark price) * commodity quantity. Realized Profit = ($1/Avg. entry price – $1/Avg. price sold) * commodity quantity.
FAQ3: What are the fees?
For a perpetual contract, every 8 hours there is a funding fee equal to 1%. All trading fees are accounted for through realized PNL.