Why can going long still result in losses when the funding rate is positive?
Many beginners mistakenly believe that a positive funding rate means they should go long, while a negative rate means they should go short. Yet they still lose money in practice.
The funding rate is not a buy or sell signal; it is simply a barometer of market sentiment. When the rate is positive, longs pay funding to shorts. When it is negative, shorts pay longs. This mechanism is designed to keep the futures price close to the spot price.
The higher the rate, the more crowded the long side is. If you chase longs at this point, you not only face the risk of a pullback but also have to keep paying funding. If longs all exit at once, the price can fall even faster.
The same applies when the rate is negative. Even if you can collect funding by going long, the market may still fall. Buying the dip just to earn a small amount in funding can easily lead to losses far greater than your gains.
How to interpret the funding rate:
An extremely high rate signals an overheated market, so be cautious about chasing longs. An extremely low rate signals weak market sentiment; you can watch for a rebound, but be sure to use a stop-loss. If the rate is within its normal range, there is no need to read too much into it—trade according to your existing plan.
The funding rate can only reflect how hot or cold the market is; it cannot predict whether candlesticks will rise or fall. Use it as a reference, but never as a basis for entering a trade. Don’t blindly go long just because you see a positive funding rate.
Follow Mark to learn how to stay profitable over the long term!
$币安人生 $龙虾
#IMF称代币化市场仍小且碎片化
Many beginners mistakenly believe that a positive funding rate means they should go long, while a negative rate means they should go short. Yet they still lose money in practice.
The funding rate is not a buy or sell signal; it is simply a barometer of market sentiment. When the rate is positive, longs pay funding to shorts. When it is negative, shorts pay longs. This mechanism is designed to keep the futures price close to the spot price.
The higher the rate, the more crowded the long side is. If you chase longs at this point, you not only face the risk of a pullback but also have to keep paying funding. If longs all exit at once, the price can fall even faster.
The same applies when the rate is negative. Even if you can collect funding by going long, the market may still fall. Buying the dip just to earn a small amount in funding can easily lead to losses far greater than your gains.
How to interpret the funding rate:
An extremely high rate signals an overheated market, so be cautious about chasing longs. An extremely low rate signals weak market sentiment; you can watch for a rebound, but be sure to use a stop-loss. If the rate is within its normal range, there is no need to read too much into it—trade according to your existing plan.
The funding rate can only reflect how hot or cold the market is; it cannot predict whether candlesticks will rise or fall. Use it as a reference, but never as a basis for entering a trade. Don’t blindly go long just because you see a positive funding rate.
Follow Mark to learn how to stay profitable over the long term!
$币安人生 $龙虾
#IMF称代币化市场仍小且碎片化