Perpetual futures have no expiry date. Without one, nothing forces the contract price back toward the spot price. Funding is the mechanism that nudges it back: a regular payment between traders who are long and traders who are short. The exchange does not keep it.
When the funding rate is positive, longs pay shorts. When it is negative, shorts pay longs. A positive rate usually appears when the perpetual trades above spot and more traders are long. The payment makes holding the crowded side more expensive and the other side more attractive.
Many exchanges settle every 8 hours. Some contracts use 4 hours or every hour, so check each contract. Funding is charged on the full position value, not on your margin. A 10,000 USD position pays on 10,000 USD even if you only posted 1,000 USD of margin.
Position value 10,000 USD, rate +0.01% per 8 hours, long.
| Period | Payments | You pay |
|---|---|---|
| 8 hours | 1 | 1.00 USD |
| 1 day | 3 | 3.00 USD |
| 30 days | 90 | 90.00 USD |
Per year that rate is 0.01% × 3 × 365, about 10.95% of the position value. It looks small per payment and becomes a real cost when you hold for weeks. A short in the same market would receive the amounts above while the rate stays positive.
Use the funding cost calculator to see the total for your size, rate and holding time.
Funding changes the real result of a trade. A trade that makes 3% on the chart and holds for two weeks at a high positive rate can end with much less. Some trackers show profit before fees and funding, so your numbers differ from the exchange statement. Compare both when you review, and record funding as its own item.
A high rate tells you that positioning is crowded on one side. It does not tell you when price will turn. Use it as information about cost and positioning, and judge any strategy built on it by testing it with real fees, real funding and data it was not tuned on.
We cover funding and perpetual futures in the lessons: see the channel.
This guide is education, not advice. Your numbers, your exchange and your rules decide what is right for you.
Longs pay shorts. It usually appears when the perpetual trades above spot and more traders are long.
No. It shows crowded positioning and cost, not timing. Judge any strategy built on it by testing with real fees and funding.
Yes. A trade that makes 3% on the chart and is held two weeks at a high positive rate can end with much less.