What are Funding Rates or futures commissions?
If you trade futures on Binance, you may have come across something called "Funding Rate" or Funding Rates. At first, it may seem technical, but understanding this can make the difference between a good entry and an entry that gradually drains you.
What is the funding rate?
The funding rate is a mechanism that aims to keep the price of the futures contract as close as possible to the spot market price. To achieve this, periodic payments are made between those who are long and those who are short.
If the funding is positive, longs pay shorts.
If the funding is negative, shorts pay longs.
This discourages everyone from being too tilted towards one side of the market.
A current practical example: AXL/USDT
At this moment, the funding rate is -0.1181% every hour, which means that those who are short are paying those who are long. This may be a sign that many people are betting on a decline... and that it may already be somewhat oversold.
If the contract is trading well above the spot, shorts are incentivized (through payments from longs), and vice versa.
These fees generally adjust every 8 hours (although it may vary for some coins).
And how does this affect you as a trader?
If you have an open position, the funding can add (or subtract) small amounts every 8 hours.
📌 Many experienced traders use funding rates as an indicator of extreme market sentiment. Not to decide on their own, but as a complementary signal to their technical or fundamental analysis.
If you trade futures on Binance, you may have come across something called "Funding Rate" or Funding Rates. At first, it may seem technical, but understanding this can make the difference between a good entry and an entry that gradually drains you.
What is the funding rate?
The funding rate is a mechanism that aims to keep the price of the futures contract as close as possible to the spot market price. To achieve this, periodic payments are made between those who are long and those who are short.
If the funding is positive, longs pay shorts.
If the funding is negative, shorts pay longs.
This discourages everyone from being too tilted towards one side of the market.
A current practical example: AXL/USDT
At this moment, the funding rate is -0.1181% every hour, which means that those who are short are paying those who are long. This may be a sign that many people are betting on a decline... and that it may already be somewhat oversold.
If the contract is trading well above the spot, shorts are incentivized (through payments from longs), and vice versa.
These fees generally adjust every 8 hours (although it may vary for some coins).
And how does this affect you as a trader?
If you have an open position, the funding can add (or subtract) small amounts every 8 hours.
📌 Many experienced traders use funding rates as an indicator of extreme market sentiment. Not to decide on their own, but as a complementary signal to their technical or fundamental analysis.