#Xrp🔥🔥 View the Funding index
The Funding rate is a periodic payment between Long and Short positions at a specific time of day. For example, on Binance, this fee is calculated every 8 hours: 7 AM, 3 PM, 11 PM. So how is this fee calculated and paid?
When the Funding rate is negative, the Short side must pay the Long side, and vice versa, when the Funding rate is positive, the Long side must pay the Short side. Funding can be viewed for each Future trading pair, on the top right of the order screen.
If the Funding rate is -0.11% as shown. You are placing a Short order, with $100 at 20x leverage. Your trading volume is $100 x 20 = $2000. The Funding fee you have to pay for this Short order is $2000 x 0.11% = $2.2.
This Funding fee of $2.2 must be paid at 7 AM, 3 PM, and 11 PM if you keep the Short order until these times. If you close the order at 6:59 AM, 2:59 PM, or 10:59 PM, before the Funding calculation time, then you do not have to pay this fee.
So if you hold a $100 Short order at 20x with this Funding fee, you will have to pay $2.2 x 3 (3 times) = $6.6 per day. This money will be paid to the Long side, not to the exchange. So if you Long $100 at 20x for this Token, you will receive $2.2 every 8 hours.
The fee above seems small, but wait. There are trading pairs where the Funding rate can drop to -2% or -2.5%. Assuming the Short order above, with $100 at 20x, if the Funding rate is -2%, try calculating how much you will have to pay every 8 hours.
Volume $100 x 20 = $2000. Multiply the volume by the Funding fee, $2000 x 2% = $40. Yes, it's $40, you're not mistaken. You only traded with $100 capital at 20x leverage, and every 8 hours you have to pay $40 in Funding fees. After one day, you have already lost $120, which is negative capital.
And let's assume someone places a Long order for $100 at 20x with a Funding rate of -2% as above, they receive $40 every 8 hours. When the market is bearish, the Funding rate can drop significantly; conversely, when bullish, the Funding rate can be positive at 2% - 2.5%.
Therefore, understanding the Funding rate is very necessary. There are times when the Funding rate is significantly negative; whenever the fee payment hour arrives, we can Long to earn the Funding fee, and then immediately cut the order, which is called scalping the fee, where the losses on the Long order are less than the Funding fees earned back.
Funding is an indicator that shows which Long/Short trend is stronger. When the Funding rate is significantly negative, it indicates that this trading pair is being heavily shorted, so it is not advisable to chase the Short, as it can easily lead to a fake-out, not to mention that Shorting at the Funding fee payment time can result in substantial losses.
Therefore, before entering an order, take a look at the Funding rate. A useful site to check Funding across all exchanges is coinglass.com. When trading on Binance, on the right corner, the Funding and Countdown (countdown to the Funding payment time) will be displayed, so pay attention.
