Funding fee in Futures trading.

If you are currently playing or planning to play futures, you need to be aware of the funding fee to avoid "losing money".

The funding fee is essentially an amount of money exchanged between traders in futures (usually perpetual futures), keeping the futures price close to the spot price.

As mentioned above, the main purpose of the funding fee is to ensure that the futures contract price does not deviate too far from the actual market price of the asset.

- If the market is in an uptrend 📈 (futures price is higher than spot price):

The buyer (Long) will pay the fee to the seller (Short).

- If the market is in a downtrend 📉 (futures price is lower than spot price):

The seller will pay the fee to the buyer.

I will illustrate how to calculate the funding fee:

Spot ETH Price: 3,000 USD

Futures ETH Price: 3,010 USD (higher than spot price, the market is rising). (A)

Funding Rate: 0.01% (B)

Amount of ETH you trade: 2 ETH (C)

Calculating the funding fee:

Funding fee = futures price * funding rate * amount of ETH

= A*B*C= 3010*0.01%*2=0.602 usdt

The funding fee is usually calculated after about 8 hours.

Therefore, when the market is sideways, if you hold a position for a long time, you may not make a profit and may even incur funding fees. So you really need to pay attention to the funding fee and open/close positions. Thank you for reading the article. Please leave a comment below if you would like.