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๐ What Is the Funding Fee?
In perpetual futures, there's no expiration date, so exchanges use a mechanism called the funding rate to keep the contract price close to the spot price.
Funding fees are payments between tradersโnot a fee to Binance.
If the funding rate is positive, longs pay shorts.
If it's negative, shorts pay longs.
This rate is calculated every 8 hours (00:00, 08:00, 16:00 UTC on Binance).
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๐ฐ Why Can the Funding Fee Be Higher Than Your Profit?
Hereโs how:
1. Small Profit, Large Position:
Say youโre scalping and you make $5 profit on a $10,000 position.
If the funding rate is 0.03%, youโd pay:
$10,000 ร 0.0003 = $3 per funding interval.
If you hold through three intervals, youโd lose $9 just in funding fees.
Net result: $5 profit - $9 funding = -$4 loss.
2. High Leverage Makes It Worse:
Funding is based on the position size, not your margin or profit.
20x leverage = small price change, big position size = higher funding impact.
3. Low Volatility or Sideways Movement:
If youโre in a flat market but paying funding every 8 hours, the funding can erode your small gains.
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๐ง Is This a Binance Issue?
Nope, not a Binance-specific issue. Itโs just how perpetual contracts work on all platforms (Bybit, OKX, etc.).
However, Binanceโs high open interest in some pairs (like $VIC) can cause more extreme funding rates at times.
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โ What You Can Do:
1. Check the Funding Rate Before You Enter a Trade
Use Binanceโs Funding Rate History or live ticker.
Avoid entering long positions when the rate is high and positive.
2. Avoid Holding Positions Across Funding Times
Close before the 8-hour mark if possible.
Example: enter at 06:00 and close by 07:50 UTC.
3. Trade Low Funding/Negative Funding Coins
If youโre short and the rate is positiveโyou earn funding.
4. Factor Funding into Your Risk Management
Funding fee = part of your trading cost,#TrumpTariffs #DayTradingStrategy #MuskAmericaParty #SpotVSFuturesStrategy #Write2Earn
