Here's a tip for traders when trading derivatives on @dYdX:
When trading derivatives, we often encounter the Funding Rate, a key indicator unique to the derivatives market.
While it cannot predict long-term trends, it can reflect traders' sentiment.
- When the Funding Rate is positive => Traders are leaning more toward Long positions.
- When the Funding Rate is negative => Traders are leaning more toward Short positions.
Therefore, when trading tokens with high Funding Rates (-2, -3, 2, or 3), exercise caution.
In practice, low-cap tokens on dYdX with significantly positive Funding Rates often experience price drops or sharp declines a few days later.
Conversely, tokens with significantly negative Funding Rates ( -2 or -3) are more likely to pump, potentially wiping out short positions.
Generally, tokens with high Funding Rates are often low-cap tokens, as their prices are easily manipulated.
What are your thoughts on the Funding Rate?
