If you hold a perpetual contract for a while, you may notice your balance changing every few hours. This is called a funding payment. It’s not a fee charged by the platform, but a payment exchanged between longs and shorts.
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Why is funding needed?
Futures contracts are settled at expiration, so their prices naturally converge toward the spot price. Perpetual contracts have no expiration date, so another mechanism is needed to keep their prices from straying too far from the spot price over the long term. Funding is that mechanism.
When the contract price is higher than the spot price, the funding rate is usually positive: longs pay shorts, making it more expensive to hold a long position. When the contract price is lower than the spot price, the rate is usually negative, and the direction of payment is reversed. Changes in the cost of holding a position help bring the contract price closer to the spot price.
How it’s calculated and when it’s paid:
Each funding payment equals the position’s notional value multiplied by the funding rate. Notional value is calculated using the mark price. For example, a position with a notional value of 10,000 USDT pays or receives 1 USDT per funding interval at a rate of 0.01%.
Only traders still holding a position at the funding time pay or receive funding. If you close your position beforehand, you won’t be affected. Funding intervals vary by contract—some are every 8 hours, others every 4 hours. During periods of sharp market volatility, the interval for some contracts may also change. Check the contract page for details.
How it relates to leverage and holding time:
Funding is calculated based on notional value and isn’t affected by your leverage. But relative to your margin, higher leverage amplifies the cost: at 10x leverage, the same 0.01% rate amounts to 0.1% of your margin.
The amount per interval is usually small, but it adds up the longer you hold a position. If you plan to hold for several days, it’s best to include funding in your holding costs. When comparing contracts, make sure you’re comparing them over the same funding interval.
What the funding rate can tell you:
A significantly positive rate is often interpreted as indicating that long positions are more crowded; a significantly negative rate suggests the opposite. But the rate reflects only the long-short bias in the contract market, not the strength of spot buying. Extreme rates can also persist for a long time—they don’t mean the price will turn around immediately.
The practical takeaway:
Funding is the “anchor” that keeps perpetual contracts close to spot prices, and it’s also part of the cost of holding a position. Understand who pays whom, when payments happen, and how they’re calculated, so you can keep clear track of your costs. Leave extra margin when trading contracts, so a sudden sharp move doesn’t force you out of your position.
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I can be wrong too, so don’t take this as advice.