Second Lecture on Anti-Cutting Day:
"Practical Strategies for Long and Short Positions in Perpetual Contracts: Judging Funding Rates and Trading Strategies"
Funding rate refers to the fees that both long and short sides periodically pay in a contract, aimed at balancing the contract and spot prices.
1. Positive funding rate:
Longs pay shorts, indicating strong bullish sentiment in the market (contract price > spot price)
2. Negative funding rate:
Shorts pay longs, indicating strong bearish sentiment in the market (contract price < spot price)
Therefore, opening a position in the opposite direction can earn funding fees (fee = rate × position size), settled every 8 hours (at 8 AM, 4 PM, and 12 AM); non-arbitrage positions can be closed before settlement to avoid payment.
How to judge whether to short or go long based on funding rates?
1. Conditions for shorting:
✅ High positive rate (e.g., >0.1%) + Overbought/resistance level + Decreasing position size
⚠️ Note: Avoid going against a strong upward trend; this must be combined with pullback signals.
2. Conditions for going long:
✅ Deep negative rate (e.g., < -0.1%) + Oversold/support level + Rising position size
⚠️ Note: Avoid blindly bottom-fishing during a sharp drop; wait for stabilization signals.
3. Key auxiliary indicators
Trend priority: High positive rates in an upward trend may only pull back, while deep negative rates in a downward trend may only rebound.
Position size: Extreme rates can lead to sudden changes in position size, indicating a reversal.
Spot basis: Verify whether the rate reflects the true premium.
4. Arbitrage opportunities:
Positive rate → Short contract + Hold spot;
Negative rate → Long contract + Hold short.
5. Risk warning:
Short-term rate noise needs to be filtered, and do not go against extreme market conditions. Must be combined with technical analysis (e.g., RSI, support and resistance) and market sentiment indicators. $ETH
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In general, rates reflect sentiment, trends determine direction, indicators verify signals, and caution is needed against the trend.
