Funding rate problem during perpetual future trading

[Oshosondy]

Has your trading fund be deducted exorbitantly before, while trading? Funding rate.

Last week, I was trading a coin, MTL. The coin funding rate increased to over 1.5%. Normally most funding can be around 0.01%, which means the charge will be little if you are on the charge side.

If the funding rate is positive, those that long are going to be charged while those that short are going to be given the money charge from those that long. If the funding rate is negative, those that short are going to be charged while those that long are going to be given the money charge from those that short.

The percentage charge can be small, like 0.01% but you should always check the funding rate. It occurs every 8 hours on all the exchanges that I have used, if you have opened a position, it would be charged (or you given the funding charged from others). If you are on the charge side but you close the position opened before the funding rate time becomes zero, you will not be charged.

I just want to advice people to be careful of the funding rate high charge, it can occur to some coins during high volatility. I saw me charged with 1.5%. Assuming I have $2500 and use 4x leverage to take it to $10000. The money that would deducted for the funding rate is around $140, if you are on the charge side.

Have you experienced this before? Charged more than expected and later find out that it is funding rate that caused it?

That was not the amount I used because I do not want to disclosed the amount, but I was not happy that time because I gained but saw reduction in my trading fund.

[1715319751]

1715319751

[1715319751]

1715319751

[1715319751]

1715319751

[OcTradism]

Funding rates are not static and they are changed after a while like 8 hours like the exchange you use. If you don't want to have abruptly big change of funding rate, you can close your position before the time. Each exchange have their timepoints for funding rate change each 24 hours and they clearly have it on their websites.

If you want to keep your position opens, you must afford to big changes like that.

[Bitcoin_Arena]

I just want to advice people to be careful of the funding rate high charge, it can occur to some coins during high volatility. I saw me charged with 1.5%.

True, but you can never be too careful. In certain times, such a high funding rate happens spontaneously due to sudden market changes

Have you experienced this before? Charged more than expected and later find out that it is funding rate that caused it?

Not yet

[Fivestar4everMVP]

Well, I have not experienced this before and I am also just learning about this for the first time, maybe this is due to the fact that I am an occasional trader, and I've never really taken out time to learn the rudiments to becoming a professional trader.
Aside the above, i also have never left a position open for more than two hours, infact I rarely leave a position open for  more than one hour, I mostly prefer taking a loss than leave a position open while am away, I consider this practice very risky, most especially when its done without a stop loss.

[adaseb]

Yes this is common and happens. It will most likely never happen with Bitcoin or Ethereum but happens on the altcoins which don’t have as big of a market cap.

Usually it happens because people are too bullish or bearish and eventually there is a squeeze one way or another. However if you entered early you should of made profit on your trade to cover the funding anyways.

[Edwardard]

Aside the above, i also have never left a position open for more than two hours, infact I rarely leave a position open for  more than one hour,

Which is why you didn't notice the effects of funding rates yet. Most exchanges have a new funding rate round every 8hrs.
@OP, as @adaseb said, funding rates can shift brutally on low-cap altcoins. So, if it does affect your trading style/strategy, just stay with btc and eth. Or just spot trade on alts, or just close your position a few minutes before the funding count comes in and re-open it afterwards again. But you may miss some price action since the rates are triggered at the same time the hourly and 4 hourly candles closes in. This is how it is and we gotta get used to it.

[adaseb]

You can close the position right before the funding and open it right after however it won’t be in your best interest. Because what will happen is as follows.

If the funding is very high such as >1% it means longs are paying shorts. So the longs will want to get out right before the funding rate time. And the shorts will want to get out right after.

So usually what happens is the prices goes down right before funding and goes up right after. So if you are long you will usually get a worst fill afterwards.

[dansus021]

Funding rates are not static and they are changed after a while like 8 hours like the exchange you use.

As far as I know the funding rate constantly changes but the time of charge is every 8 hours but correct me If i am wrong.
Yes my trader in my community always trade at the opposite direction when they are see funding rate are higher than normal to get benefits from people like you, 1.5% is high funding especially if you are using high leverage it very hurt to see your money has taken away. although you need to stay away from high FF or exit before the countdown finish.

You can also check in here before start trade.
https://www.binance.com/en/futures/funding-history/perpetual/0

[logfiles]

As far as I know the funding rate constantly changes but the time of charge is every 8 hours but correct me If i am wrong.

By the way, not all exchanges have funding rates set at every 8 hours. Some exchanges like Kraken and Dydx have their funding rates set at every 1 hour

Here is the announcement from Kraken - https://support.kraken.com/hc/en-us/articles/9618146737172-Perpetual-Contracts-Funding-Rate-Method-Prior-to-September-29-2022
this is for Dydx  -https://help.dydx.exchange/en/articles/4797443-perpetual-funding-rate

[dansus021]

By the way, not all exchanges have funding rates set at every 8 hours. Some exchanges like Kraken and Dydx have their funding rates set at every 1 hour

Here is the announcement from Kraken - https://support.kraken.com/hc/en-us/articles/9618146737172-Perpetual-Contracts-Funding-Rate-Method-Prior-to-September-29-2022
this is for Dydx  -https://help.dydx.exchange/en/articles/4797443-perpetual-funding-rate

Thanks for the info and yes we should regularly check this because in my opinion funding rate is a crucial point it can be an indicator of a trend of the coin and also we can know the long and short ratio just by looking at the funding rate.