There’s one word you can’t avoid when trading perpetual contracts: the funding rate. It’s settled every 8 hours, between
a payment made between each other. The exchange just collects and remits it; it doesn’t make money from it.
【Mechanism】Perpetual contracts don’t have a delivery date. How does the price stay consistent with the spot price? It relies on the funding rate:
The contract price is higher than the spot price (bullish sentiment is strong) → the funding rate is positive → bulls pay shorts;
The contract price is lower than the spot price (bearish side is in control) → the funding rate is negative → shorts pay bulls.
Move money back and forth to pull the contract price toward the spot price.
【Cost】Don’t underestimate how often you pay once every 8 hours: when annualized, the fee rate can reach several dozen percent.
When going long, if you keep paying a high fee rate, even if your direction is right, your profit will be quietly worn down.
【A practical habit】Before opening a position, check the current fee rate. When the fee rate is very positive, chase longs—you’re giving the shorts…
…work; when the fee rate is extremely negative, chase shorts—same logic. The fee rate isn’t a directional indicator, but it is a cost, cost
That affects the value-for-money of your trade.
What do you think? Share your experience in the comments.