Lesson 18: Funding Rate & Funding Fee โ What They Are & How Often It Happens ๐๐งฎ
If you trade futures, you must know about the funding fee โ itโs the fee exchanged between traders to keep perpetual futures prices close to spot prices. Letโs break it down ๐
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What Is Funding Fee? ๐ธ
Funding fee is the payment made between long and short traders based on the funding rate. Itโs not paid to Binance but trader to trader.
When funding rate is positive โ โ Longs pay shorts
When funding rate is negative โ โ Shorts pay longs
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How Often Is Funding Paid? โฐ
Funding fee is exchanged every 8 hours on Binance Futures.
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How Is Funding Rate Calculated? โ๏ธ
It combines:
1. Interest Rate: a small fixed rate based on USD lending costs
2. Premium Index: the difference between futures price and spot price
Funding Rate = Interest Rate + Premium Index
If futures price > spot โ funding rate positive โ longs pay shorts
If futures price < spot โ funding rate negative โ shorts pay longs
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Why It Matters ๐ฐ
Keeps futures price near spot price
Funding fee affects your PnL every 8 hours
High funding signals market bias (too many longs or shorts)
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Pro Tip ๐
Always check funding rates before entering trades โ it can make or break your profits!
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Next lesson: Lesson 19 โ What Is a Perpetual Contract vs Quarterly Futures ๐ โก
