> ## Documentation Index
> Fetch the complete documentation index at: https://docs.priest.trade/llms.txt
> Use this file to discover all available pages before exploring further.

# Funding Rates

> Funding rates are regular payments exchanged between traders to keep the perp contract price in line with the spot price.

Funding rates are regular payments exchanged between traders to keep the perp contract price in line with the spot price.

***

## How funding works

Funding does not go to Priest.trade. It flows **directly between longs and shorts**:

* **Perp price is HIGHER than spot (premium):**
  * Funding rate is **positive**.
  * **Longs pay shorts.**
  * This makes longing more expensive and rewards shorting, nudging the price back down toward spot.
* **Perp price is LOWER than spot (discount):**
  * Funding rate is **negative**.
  * **Shorts pay longs.**
  * This makes shorting more expensive and rewards longing, nudging the price back up toward spot.

***

## Continuous settlement (no 8-hour cliff)

Most centralized exchanges settle funding once every 8 hours. If you close your trade 1 minute before the bell, you pay nothing; if you enter 1 minute before, you pay the full amount.

On Priest.trade:

* Funding accrues **second by second**.
* It settles automatically whenever you open, increase, reduce, or close your trade.
* You only pay or earn funding for the exact minutes and seconds your position was actually open.

***

## Funding caps

To prevent wild funding spikes from draining traders during brief market wicks:

* Funding velocity is capped per interval.
* Total funding per period cannot exceed the contract rate cap (typically 1.0% per interval).
* If trading volume or open interest is near zero, funding accumulation pauses so artificial debt doesn't build up on dormant markets.

***

## See also

* [Perpetual Futures Primer](https://docs.priest.trade/core-concepts/perpetual-futures.md) — the basics of perpetual trading.
* [Fees](https://docs.priest.trade/trading/fees.md) — standard trading fees vs funding.
* [Liquidations](https://docs.priest.trade/core-concepts/liquidations.md) — how accumulated funding affects liquidation.


This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.