> For the complete documentation index, see [llms.txt](https://perps.gitbook.io/perps./llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://perps.gitbook.io/perps./overview/perp-mechanics.md).

# Perp Mechanics

This page explains the main perpetual-market concepts used by `perps.`

## Index Price and Mark Price

The index price is the reference price path for a market.

The mark price is the operational price used by the trading system for position state, PnL, and risk checks.

## PnL

PnL means profit and loss.

* A long position generally profits when the market rises.
* A short position generally profits when the market falls.
* Unrealized PnL can change as prices and funding change.

## Funding

Funding is a periodic transfer mechanism between longs and shorts. It helps keep perpetual pricing aligned with the reference market.

Funding may be positive or negative depending on market conditions.

## Liquidation

A position can be liquidated if its remaining margin is not enough to support the position.

Liquidation depends on:

* Position side.
* Position size.
* Entry price.
* Current mark/index state.
* Margin.
* Funding.
* Market risk settings.

The liquidation price shown in the UI is an estimate under current conditions. It can move as the market changes.

## Slippage

Slippage is the difference between expected execution and actual execution. Larger trades, fast markets, and thinner liquidity can increase slippage.

## Risk Controls

Markets may enforce limits such as:

* Maximum leverage.
* Maximum position size.
* Market open-interest caps.
* Skew limits.
* New-position pause controls.

These controls are designed to reduce unsafe market states and may change during testnet.