Funding rate

Funding is a small payment between longs and shorts that keeps a perpetual close to spot. You'll work out who pays and how much, then read what a very high rate can suggest.

A future has an expiry date that drags it back to spot. A perpetual has none, so exchanges use funding instead.

When the perpetual trades above spot, longs pay shorts. That makes holding a long more expensive and a short more attractive, which pushes the two prices back together. When the perpetual trades below spot, it works the other way round.

The funding rate is a percentage of the position. A rate of +0.03% on a $1,000 position is $0.30.

A positive rate means longs pay and shorts receive. A negative rate means shorts pay and longs receive. The money goes from one group of traders to the other; the exchange doesn't keep it.

Funding turns negative when the perpetual trades below spot. That usually happens after a drop: lots of traders want to be short (betting the price falls) and they're willing to sell the perpetual for less than spot.

Then the rule flips. At each settlement, shorts pay and longs receive, just for keeping the position open. Staying short gets more expensive and buyers get paid to step in, which pulls the perpetual back toward spot.

A deeply negative rate means the short side is crowded. If the price turns up, many of those shorts may close at once. Drag the clock and follow a $1,000 long and a $1,000 short.

Funding changes hands at set times. Most Binance perpetuals settle every 8 hours, at 00:00, 08:00 and 16:00 UTC, and some markets settle more often.

You only pay or receive if you hold a position at a settlement time. Signals here use each market's actual settlement times.

Move the open time and the holding time.

0.01% per settlement is Binance's usual baseline, and it looks tiny. But it's paid three times a day, which adds up to about 11% a year.

Rates of 0.05% or more mean traders are paying a lot to keep their positions. Move the rate to see what it costs to hold a long for a week.

When funding climbs, it usually means many traders are long and willing to pay to stay that way. A crowded side can keep pushing for a while, and it can also unwind fast if the price turns.

Here funding rises through a rally and flips negative after the drop. Bots here show you the rate; what it means for the next move is your call.

This is 30 days of settlements. The Extreme funding template fires when funding reaches 0.05% or more.

Move the threshold and count the Signals. When a Signal stays open on a perpetual, its net PnL includes every funding payment made or received along the way.

Three quick questions, then a bot to build.

Read the strategy and set up a bot that follows it, with the direction and the conditions it names and no others. Passing depends on the build alone. Once it's right, the bot fires and you see what the market did next, which won't always go your way.