#Importantadvice ✳️Ever notice how you see profits during a trade, but end up with a loss after closing it? 👀
That sneaky culprit is funding fees.
The silent profit killer that even experienced traders overlook.
Here’s how they work and why they matter, especially for high-leverage players.
✳️Let’s Break it down…
So, what exactly are funding fees? 🧐
The price of perpetual contracts can diverge from the spot price
Funding fees are payments between traders to keep perpetual contract prices close to spot prices, to prevent wild price swings. ⚖️
✳️Here's a quick example:
Assume the average funding rate is 0.01%.
If you have a position of $500 with a 10x leverage, the total amount in the trade is $5,000.
Now, to calculate the funding fee: $5,000 multiplied by 0.01% gives you a funding fee.
This fee would be charged every 8 hours as long as you hold the position.
✳️Who Receives and Pays Funding Fees ?
Positive Funding Rate:
Long position holders pay funding fees to short position holders. This occurs when the price of the perpetual contract is higher than the spot price.
Negative Funding Rate:
Short position holders pay funding fees to long position holders, which happens when the perpetual contract price is below the spot price.
✳️Want to avoid funding fees altogether? 🚫
Easy!
Just close your position right before the fee is charged.
Most exchanges calculate it every 8 hours, so time it right and save that fees! ⏰
But wait, there's more! Funding fees can actually be your secret weapon!
Use them as a signal for potential trend reversals.
Combine it with indicators like RSI and open interest for maximum impact. 📈📉
Beware! If you don't have enough funds to cover the fee, the exchange will take it directly from your position margin.
This can trigger liquidation, leading to a total loss. ⚠️
So, manage your risk carefully! 🛡️