I'll quickly explain for newcomers what funding is, and for the pros, how to profit from it❗️
Let's roll 🚗👇
If you're trading futures, you've definitely seen the countdown timer and the percentages next to it. That's funding (funding rate). Let's break it down simply, how it works and when exactly they deduct funds from your account.
🔹 What is funding and why is it needed?
Perpetual futures have no expiration date. To keep the futures price from straying too far from the actual (spot) price of the coin, they invented funding.
This is a self-regulating market mechanism. The exchange doesn't take anything for itself here—traders pay each other:
🟢 Positive funding: There are too many longers, the futures price is above the spot. Long pays Short.
🔴 Negative funding: There are too many shorters, the futures price is below the spot. Short pays Long.
🕒 The main secret: HOW exactly is money deducted?
Money is deducted or credited strictly at the moment the timer hits (usually every 4 or 8 hours, for example, at 04:00, 12:00, 20:00 UTC).
Did you go in and out within the cycle? You do NOT pay funding. If you opened a trade at 12:05 and closed at 19:55—the funding fee is zero.
Did you close just a second before the timer? There will be NO deduction. Even if you held the position for 7 hours and 59 minutes.
Did you open just a second before the timer? You will be charged (or credited) the full amount for the entire 8-hour cycle.
💡 Important: When entering and exiting a trade, you always pay the regular trading fee to the exchange (maker/taker). But this has nothing to do with funding.
📊 How to calculate the amount?
Funding is calculated based on the full size of your position considering leverage, not on the margin amount.
Formula: Position size × Funding rate.
Example: You went long with $1,000 at 10x leverage (position size $10,000). Funding rate +0.01%. At the moment the timer hits, they will deduct $1 from you ($10,000 × 0.0001). If the leverage is 50x, then with the same $1,000 margin, the position size will be $50,000, and the deduction will be $5.
🧠 Trader life hacks
Run away before the timer: If you're in a large position against the market (for example, long when the funding is skyrocketing), it makes sense to close the trade a minute before the calculation and re-enter a minute later.
Hunting for funding: Some traders open a short just a second before the timer during high positive funding, take the payout from longers, and immediately close the position.
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