Funding rate in derivative trading

[Oshosondy]

I have noticed recently on exchanges that the time for the funding rate is 8 hours, which means 3 times daily. People that go either long or short can be given the funding fee or deducted from their trading fund they used to open a position, just to make sure that there is no much divergence in spot and derivative price of an each coins in derivative market.

When is the funding fee deducted? Is it every 8 hours also or at a specific time later? Or when the position is closed?
Or it is possible to see the funding fee added or deducted every 8 hours?

I noticed I can see the fee on Kucoin after the position is closed, but I can not see it on other exchanges that I am using.

[1714757698]

1714757698

[adaseb]

The funding fee is credited or deposited as realized PnL when the 8 hour window closes. If you close your position before the funding you don’t pay anything or get credited.

If you open a trade 1 minute before funding and close it 1 minute after funding you would have to pay the funding (or get credited).

[Bitcoin_Arena]

When is the funding fee deducted? Is it every 8 hours also or at a specific time later? Or when the position is closed?

Funding rate is deducted or added every 8 hours. If you close your position before the 8th hour, funding rate won't affect your equity in the derivatives account

Or it is possible to see the funding fee added or deducted every 8 hours?

Yes, it possible to see it under your trade history depending on the kind of exchange you are using

Here is an example of a trade history of my experimental BTCUSD open position sometime back

I noticed I can see the fee on Kucoin after the position is closed, but I can not see it on other exchanges that I am using.

Never used Kucoin for trading derivatives. Are you sure it's not the normal trading fee for closing the position?

You might want to check out their FAQs.

[Oshosondy]

Never used Kucoin for trading derivatives. Are you sure it's not the normal trading fee for closing the position?

See an example:



I used it to open a position for sometimes on Kucoin when learning how derivative trading is on the exchange. You will be able to see the trading fee and the funding fee.

But I will not yet recommend Kucoin for derivative trading because the trading fee is kind of high for me and the liquidation price is closer to the entry price compared to while using some other exchanges.

[Bitcoin_Arena]

I used it to open a position for sometimes on Kucoin when learning how derivative trading is on the exchange. You will be able to see the trading fee and the funding fee.

I think it's the cumulative funding fee (funding fee over given periods of 8 hours when your position was open)

More like if your position was open for 24 hours and every 8 hours, there was a funding fee, that would be the cumulative funding fee for the 3 times it was deducted or added into your account during the 8 hour.

Edit:

You can use this link to check: https://www.kucoin.com/futures/records/funds-history

[fennic]

I have noticed recently on exchanges that the time for the funding rate is 8 hours, which means 3 times daily. People that go either long or short can be given the funding fee or deducted from their trading fund they used to open a position, just to make sure that there is no much divergence in spot and derivative price of an each coins in derivative market.

When is the funding fee deducted? Is it every 8 hours also or at a specific time later? Or when the position is closed?
Or it is possible to see the funding fee added or deducted every 8 hours?

I noticed I can see the fee on Kucoin after the position is closed, but I can not see it on other exchanges that I am using.

In some exchanges funding fee is per 24 hours like Binance and it is very lowest among other exchanges and I like it. And also if if you have opened posting before even 5 minutes of funding rate than you would have to pay fee. And there is just ni deniability.
Kucoin is also good exchange but I think they still have larger fee as compared to Binance. Binance also offers zero fee on Busd pairs and that is insane cause it would save many dollars for those who trade millions dollars per month.

[Oshosondy]

In some exchanges funding fee is per 24 hours like Binance and it is very lowest among other exchanges and I like it.

I have used 4 different exchanges, the funding rate is every 8 hours. Also on Binance, it is 8 hours.

Kucoin is also good exchange but I think they still have larger fee as compared to Binance. Binance also offers zero fee on Busd pairs and that is insane cause it would save many dollars for those who trade millions dollars per month.

Binance fee is low if using BUSD perpetual. Comparing it with USDT perpetual on OKX and Huobi and some other exchanges that has derivative trading, they are almost more like the same.

Spot trading fee for bitcoin is zero on Binance.com, even they have started that also for ether on Binance.us. They have discount for BNB trading pair.

Kucoin fee is too high is what I noticed, but you can trade without KYC.

[OcTradism]

Never used Kucoin for trading derivatives. Are you sure it's not the normal trading fee for closing the position?

Why is Kucoin not good for derivative tradings?

Could you share more details, please.

How about BitMEX exchange for derivatives tradings in your opinion, could you share?
I am familiar with BitMEX that is good in my opinion for derivative tradings but they don't have many pairs for derivatives. However in fact we don't need hundred of derivative trading pairs. Too many pairs only cause us more easily to lose money.

I usually trade with Bitcoin and Ethereum.

[Edwardard]

Why is Kucoin not good for derivative tradings?

The interface is not liked by many ppl. Also, the volume is less (low liquidity).

How about BitMEX exchange for derivatives tradings in your opinion, could you share?
I am familiar with BitMEX that is good in my opinion for derivative tradings but they don't have many pairs for derivatives. However in fact we don't need hundred of derivative trading pairs. Too many pairs only cause us more easily to lose money.

Bitmex used to be one of the top derivatives exchange (even above binance) until the CEO (Arthur hayes) started having some legal issues. Now, bitmex is too illiquid, and is not recommended too. However, it has got one advantage that the derivates maker fee is -0.01% which means you earn to open a limit trade (which most of the exchanges dont offer). Other than this, there's no incentive to use bitmex. I'd say go with bybit or binance since they are popular and more trusted (atleast for now). BTCs price is mostly driven by binance while others follow.
And you're right, alts shouldnt be traded in derviates mode since they are more uncertain than BTC and ETH. Imo, you just have to trade the king (BTC) and you can earn enough for your living with right entry and leverage.

[Oshosondy]

Never used Kucoin for trading derivatives. Are you sure it's not the normal trading fee for closing the position?

Why is Kucoin not good for derivative tradings?

Could you share more details, please.

He only meant that he has never used Kucoin for derivative trading before, but it sounds confusing though as it can be interpreted for another meaning entirely.

The interface is not liked by many ppl. Also, the volume is less (low liquidity).

I like Kucoin user interface, it is one of the modern and best ones, but I noticed if I moved coin from one account to another on Kucoin, like from spot to trading or perpetual account, it may take like 10 seconds before it would appear, what I do not noticed as it is immediately on other exchanges that I am using, sometimes it do confuse me like I do not do the right thing, but I do wait awhile now to let the coin transferred to apprear.

Kucoin volume is not small. It is one of the topmost rated exchanges and having over $1.5 billion in 24 hours trading volume. Do you think that is small? That is huge.

[Bitcoin_Arena]

Binance also offers zero fee on Busd pairs and that is insane cause it would save many dollars for those who trade millions dollars per month.

Obviously, they are trying to promote their stablecoin BUSD. I remember when they even decided to delisted other stablecoins like USDC, TUSD citing low liquidity which I don't think was true

I don't use Binance for derivatives trading anyway, I would rather use MEXC or phemex. There are so many options out there.

Kucoin volume is not small. It is one of the topmost rated exchanges and having over $1.5 billion in 24 hours trading volume. Do you think that is small? That is huge.

Yep, in fact, they went ahead to block access from my current location. I discovered when I checked yesterday. I had to use VPN 

[OcTradism]

Bitmex used to be one of the top derivatives exchange (even above binance) until the CEO (Arthur hayes) started having some legal issues.

Arthur Hayes was free from jail recently.

However, it has got one advantage that the derivates maker fee is -0.01% which means you earn to open a limit trade (which most of the exchanges dont offer).

Could you explain it more please.

Their funding rates change each 8 hours, sometimes rates are positive and sometimes rates are negative.

Other than this, there's no incentive to use bitmex. I'd say go with bybit or binance since they are popular and more trusted (atleast for now). BTCs price is mostly driven by binance while others follow.

If I choose from Bybyt and Binance, I would choose Binance, not Bybyt. Bybyt has some bonus programs for their users but the exchange is new and smaller than Binance. More risk to use Bybyt than Binance.

And you're right, alts shouldnt be traded in derviates mode since they are more uncertain than BTC and ETH. Imo, you just have to trade the king (BTC) and you can earn enough for your living with right entry and leverage.

Altcoins are less certain than Bitcoin and biggest altcoin Ethereum. They have lower trading volume so they are more easily manipulated by whales and market markers. When manipulations on low trading-volumed altcoins occur, liquidations will find derivative traders.

[Oshosondy]

Binance also offers zero fee on Busd pairs and that is insane cause it would save many dollars for those who trade millions dollars per month.

Obviously, they are trying to promote their stablecoin BUSD. I remember when they even decided to delisted other stablecoins like USDC, TUSD citing low liquidity which I don't think was true

I don't use Binance for derivatives trading anyway, I would rather use MEXC or phemex. There are so many options out there.

That is true, there are many other exchanges that offers derivative trading, I have used 4 exchanges for derivative trading before and not only Binance I am still using for now, I use others too. Even for BTC pair, I prefer to just use OKX for it most of the time which is the only pair I prefer while using OKX, although OKX has other pairs and it is a good exchange too. Only complain that I always talked about the exchanges is their mobile app, if you click on it to bring up coin trading pair list, it will take like 3 to 5 seconds to load, unlike many other exchanges that it would have loaded immediately because it has loaded underground immediately you visit the exchange with the app.

On Binance, BUSD trading pairs are not zero fee, there are charges for it unless it is BTCBUSD. BTCUSDT and other bitcoin pairs are all of zero fee too.

While trading derivative on Binance, their is discount for using BUSD though, but not zero fee.

I am surprised that USDT is paired on OKX even for derivative trading just like USDT. Binance saying they automatically convert it to BUSD is just one of the centralization Binance is aiming and the exchange wish BUSD to overtake USDC with their BUSD is what I am thinking. Binance is a bad example if looking for exchanges that wants decentralization.

[dansus021]

The funding fee is credited or deposited as realized PnL when the 8 hour window closes. If you close your position before the funding you don’t pay anything or get credited.

If you open a trade 1 minute before funding and close it 1 minute after funding you would have to pay the funding (or get credited).

This is actually 1000% true, the funding fee is credited or deducted when within 8 hours, some exchanges usually showed a timer on the top of the trading view chart.

There is actually a trader that farming funding fee, it mean they open position against the funding fee.

For example, if the funding fee showed in plus position they take short position before the time close or they take long position when the funding fee showed negative.

I have tried it and this really can make a little bit of profit if you have a big amount of open position and open trade -20 minutes before the countdown and make sure the funding fee is high(but after the countdown the price will back to normal) and don't forget to put stop losses at BEP position.

[Wapfika]

The funding fee is credited or deposited as realized PnL when the 8 hour window closes. If you close your position before the funding you don’t pay anything or get credited.

If you open a trade 1 minute before funding and close it 1 minute after funding you would have to pay the funding (or get credited).

This is actually 1000% true, the funding fee is credited or deducted when within 8 hours, some exchanges usually showed a timer on the top of the trading view chart.

There is actually a trader that farming funding fee, it mean they open position against the funding fee.

For example, if the funding fee showed in plus position they take short position before the time close or they take long position when the funding fee showed negative.

I have tried it and this really can make a little bit of profit if you have a big amount of open position and open trade -20 minutes before the countdown and make sure the funding fee is high(but after the countdown the price will back to normal) and don't forget to put stop losses at BEP position.

Only whale trader can farm funding fee since it’s just a small percentage and almost negligible to a small margin amount. Whales with huge fund and using high multiplier can benefit on this funding rate but it incorporates some risk since he is betting against the momentum of trade. There’s a chance that price go in different direction to his position that will cause him huge loss.

The only to benefit on funding rate is to timing your position when during the trend is already shifting in the 8 hours window. I saw this technique on one of the member on our local board.

[Edwardard]

Arthur Hayes was free from jail recently.

But he is no longer the ceo of bitmex and has already lost his credibility. Ppl probably dont trust him too much and bitmex stands nowhere near top exchanges.

Could you explain it more please.

Their funding rates change each 8 hours, sometimes rates are positive and sometimes rates are negative.

I didnt mean funding rates here. It was about limit order maker fee rates(rebates), this is very different to funding rates.

If I choose from Bybyt and Binance, I would choose Binance, not Bybyt. Bybyt has some bonus programs for their users but the exchange is new and smaller than Binance. More risk to use Bybyt than Binance.

Bybit is lag-free everytime, but binance does hang a lot during periods of extreme volatility. Its upto you. Both are equally safu in my view.

[dansus021]

Only whale trader can farm funding fee since it’s just a small percentage and almost negligible to a small margin amount. Whales with huge fund and using high multiplier can benefit on this funding rate but it incorporates some risk since he is betting against the momentum of trade. There’s a chance that price go in different direction to his position that will cause him huge loss.

The only to benefit on funding rate is to timing your position when during the trend is already shifting in the 8 hours window. I saw this technique on one of the member on our local board.

Yes and No

Yes : of course because whale can easily turn up one minute candle in any direction and pretty much they are got more benefit than small trader.
No : since we are trading in futures derivatives small trader can hit the leverage to maximum the exchange allowed although is very risky

I have tried this Fund Fee farming a couple of times I usually start to know the price start to against direction when timing -20 Minutes before countdown of funding fee begin. I usually using 20-30$ with x30 leverage and put stop loss above my initial price.

[CASHFORGIFTCARDS]

What is trade funding rate? Why the fund is very important for a company?
Both yes and no

Yes, of course, because a whale can easily turn up a one-minute candle in any direction and thus has a greater advantage than a small trader.
No, because we are trading in futures derivatives, a small trader can use the maximum exchange allowed, though this is extremely risky.


I've tried Fund Fee farming a few times before. I usually start to notice when the price begins to move in the opposite direction -20 minutes before the funding fee countdown begins. I usually use 20-30$ with x30 leverage and set my stop loss price higher than my initial price.

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[Oshosondy]

This is actually 1000% true, the funding fee is credited or deducted when within 8 hours, some exchanges usually showed a timer on the top of the trading view chart.

There is actually a trader that farming funding fee, it mean they open position against the funding fee.

For example, if the funding fee showed in plus position they take short position before the time close or they take long position when the funding fee showed negative.

I have tried it and this really can make a little bit of profit if you have a big amount of open position and open trade -20 minutes before the countdown and make sure the funding fee is high(but after the countdown the price will back to normal) and don't forget to put stop losses at BEP position.

I can not because of funding rate go for a particular position. If you make profit in trading, likely the direction taken will not be favoured. Or is that not true?

I have not known if a funding rate would be represented with a positive sign or negative sign where it is counting down, but what I still only think is that long will pay shot when most traders go long which result to perpetual price to be higher than the spot price, while if it is other way and most traders go short, short position traders will pay long position traders.

[dansus021]

I can not because of funding rate go for a particular position. If you make profit in trading, likely the direction taken will not be favoured. Or is that not true?

I have not known if a funding rate would be represented with a positive sign or negative sign where it is counting down, but what I still only think is that long will pay shot when most traders go long which result to perpetual price to be higher than the spot price, while if it is other way and most traders go short, short position traders will pay long position traders.

First things first you need take a look the coin with high funding fee rate, and i see that you are using binance right?

Go to this https://www.binance.com/en/futures/funding-history/0
And then start to pick a coin with high funding rate whether at minus position or plus position usually trader use the funding rate to know the long and short ratio high (+) mean so much trader take a long position high (-) mean so much trader take a short position

After u pick the high funding rate watch the candle and switch lower timeframe 1 minute or 5 minute if funding (+) whale will be take short position and the price will go down for about 30 minutes before countdown, you take short position and then usually you will get profit from your position and after that place stoploss @ the above initial price vice versa

After countdown you will get funding fee @ history tab and the price will continue @ normal stage