Learn about trading
What is a funding rate?
Last updated
The funding rate is a small periodic payment that keeps perpetual prices anchored to real-world asset prices. It's exchanged directly between traders holding Long and Short positions — every hour.
You don't need to think about it much on short-term trades. But if you're holding a position for days or weeks, it adds up.
Why does it exist?
Perpetuals never expire. Without a settlement date, there's no natural mechanism to force the perp price back in line with the real asset price (called the "spot price" or "index price").
The funding rate creates that mechanism.
If too many people are long (bullish), it becomes expensive to stay long — which pushes the price back down toward reality.
Who pays who?
Every hour on Markets, one of three things happens:
1. Market is bullish (more longs than shorts)
→ Longs pay shorts a small fee
This makes it slightly expensive to hold a long position, which naturally balances the market.
2. Market is Bearish (more Shorts than Longs)
→ Shorts pay longs a small fee
3. Market is balanced
→ Nobody pays anything. Rate = 0.
The numbers in practice
Funding rates are usually tiny — often between 0.01% and 0.1% per hour.
Example at 0.05% per hour:
Position size | Funding per hour | Per day (24hr) | Per week |
|---|---|---|---|
$1,000 Long | $0.50 | $12 | $84 |
$5,000 Long | $2.50 | $60 | $420 |
$10,000 Long | $5.00 | $120 | $840 |
Funding rates spike during high-volatility events (earnings, macro data) when sentiment gets very one-sided.
When funding works FOR you
Funding isn't always a cost. If you're on the right side, it's income.
Example: The market is extremely bullish on NVDA. Funding rate is 0.08%/hour (longs paying shorts).
If you go Short on NVDA, you're collecting 0.08% per hour from longs while waiting for the trade to play out.
This is sometimes called a funding rate arbitrage or delta-neutral yield strategy.
Key things to know
- ✅ Funding is settled every 1 hour on Markets
- ✅ You can see the current funding rate on every ticker page
- ✅ If the rate is positive, longs pay shorts
- ✅ If the rate is negative, shorts pay longs
- ✅ Funding only applies to open positions — if you close before the hour mark, you don't pay
Practical checklist before holding overnight
Before holding a perpetual position overnight or for multiple days:
- [ ] Check the current funding rate on your ticker
- [ ] Estimate the daily cost (rate × 24)
- [ ] Factor this into your profit target
- [ ] Consider whether a stop loss adequately protects you
These are some basic things to consider when conducting any trade.
On this page