Funding transfers between longs and shorts to keep perpetual prices near spot. Positive funding usually means longs pay shorts; negative funding usually means shorts pay longs. It is a carrying cost and positioning indicator, not a guaranteed reversal signal.
Transparent formula
Funding payment = position notional × funding rate × number of intervals
Worked example
A $50,000 long position paying 0.01% every eight hours costs $5 per interval. Held for 24 hours at the same rate, total funding is about
Use this sequence
- Use position notional, not margin.
- Check settlement interval and sign.
- Estimate total holding periods.
- Compare with expected trade edge.
Common mistakes
- Multiplying funding by margin only.
- Assuming the rate stays constant.
- Using extreme funding as an automatic reversal.
Verify next
Frequently asked questions
Can funding exceed trading fees?
Yes, especially for leveraged positions held across many intervals.
Does positive funding mean price must fall?
No. It signals positioning pressure, but trend and liquidity can persist.
Which price determines the payment?
Exchanges typically use position notional based on mark or index-related calculations defined in their rules.
This page provides calculation and research frameworks, not investment, legal or tax advice.
