Funding rate question

[Oshosondy]

This question come my mind because nobody taught me crypto trading, I know all by myself. There was a day that I opened a short position with a shit coin pair that has increased in price significantly. This is very dangerous because the coin can still double or do 2x more within minutes or in few hours just like shit coins, but I thought was so lucky as the coin dropped significantly. I gained slightly more than $200, but when I went to balance, my balance remained almost the same. I thought the exchange has cheated me, but I do not wait or have any second thought than to contact the exchange customer care, they told me about funding rate. I went to see the funding rate on the trading history, it was slightly more than $200, so I gained almost nothing on a position that I thought I gained slightly more than $200

[Floczy]

That's actually risky, but it's a good one you caught it

About the exchange, you know I personally and a lot of traders out there usually learn more after losses, it's like part of trading,

But in this one I will assume you where quite carried away on the price movements, and expectations that you cared less about their funding rates and fees, this actually happens sometimes to me as well, especially with a big contribution from FOMO, once I see a position I overlook some of these important informations I need to know about. It's better we learn and start observing these things.

So you made profits for you exchange I guess 

[tvplus006]

...I went to see the funding rate on the trading history, it was slightly more than $200, so I gained almost nothing on a position that I thought I gained slightly more than $200

This happens when trading exclusively with new tokens, and funding can be very high, as a rule -2%, which is also almost always charged by the exchange every hour. Trading coins such as BTC, ETH SOL and other top coins that have high liquidity, such high funding never happens, even on dump/pump.

[sergiorus]

This question come my mind because nobody taught me crypto trading, I know all by myself. There was a day that I opened a short position with a shit coin pair that has increased in price significantly. This is very dangerous because the coin can still double or do 2x more within minutes or in few hours just like shit coins, but I thought was so lucky as the coin dropped significantly. I gained slightly more than $200, but when I went to balance, my balance remained almost the same. I thought the exchange has cheated me, but I do not wait or have any second thought than to contact the exchange customer care, they told me about funding rate. I went to see the funding rate on the trading history, it was slightly more than $200, so I gained almost nothing on a position that I thought I gained slightly more than $200

i didn't find any question in your post but yep this is what happens when something is being shorted to the ground by a crowd.
shorters or longers pay or get paid depending on if they're the majority (pay) or the minority (get paid).
and if shorters significantly overweight longers, the funding rate can be nasty, especially since it's paid every hour or every few hours, depending on platform rules.
in extreme cases you may end up getting liquidated even if the price hasn't moved at all.

[AVE5]

...I went to see the funding rate on the trading history, it was slightly more than $200, so I gained almost nothing on a position that I thought I gained slightly more than $200

This happens when trading exclusively with new tokens, and funding can be very high, as a rule -2%, which is also almost always charged by the exchange every hour. Trading coins such as BTC, ETH SOL and other top coins that have high liquidity, such high funding never happens, even on dump/pump.

Hmm there's really a lot of studies required in this trading stuff. One will think you've learnt more than enough meanwhile that which you know in the trading could just be your beginners point.
When it comes to this trading, I only see bitcoin and the few notable coins as option to deal with. I just stays off from those newly launched coins because I don't truth its potential value in the first place.
From the experience of the Op and what you've just said about this new coins and their charges in the exchange even have to scare me more to risk.

[noorman0]

Shitcoin pairs (meaning memecoins?) typically have the highest funding costs due to their high volatility. This is useful for balancing derivatives and spot market prices, or in other words, mitigating the impact of excessive position volume in one market type.

[BitMaxz]

Well, some coins that I trade before, I thought the exchange was stealing my profit because I made a profit, but then it suddenly disappeared until I learned about the funding rates.

That is why trading with a random coin without checking the current coin trading rules and funding rates chart, you will always end up surprised to make a profit suddenly without you knowing or losing even if you made a profit.

It only happens on projects, honestly, and cheap coins that suddenly pump and then dump because they take advantage of arbitrage to take the funding rates.

You better stick with high market cap coins.

[Zaguru12]

It only happens on projects, honestly, and cheap coins that suddenly pump and then dump because they take advantage of arbitrage to take the funding rates.

You better stick with high market cap coins.

I will be pointing to an exchange directly which has had one to suffer about this for a long time and this is the MEXC exchange. Seriously funding rates are usually that which you hardly understand prior to when you’re learning trading you only experience it during real trading.

For me there the exchanges surety for actually listing those shitcoins because we all know that most of the shitcoins actually follow similar Pattern which is a long pump and a prolonged dump. So I am used to shorting most of them most especially those which carries large number as suffixes (100, 1000 or any of these), you could earn more than 300 from them without earning anything. I usually placed it like it’s just the exchange not wanting anyone to hold the coin for long.

Now I don’t trade them shit coins but for anyone trading them I think funding rates should be part of their analysis before trading that pair

[Bitcoin_Arena]

When shorting shitcoins, especially those that have just been listed (they usually first pump for a few hours and then start dumping). It's very important first you look at the funding fees and the intervals the funding is going to happen (for some shitcoins it's hourly) and then the 24-hour turnover in USDT.

Funding fees can even go up to 2-3%, which is the cap for most exchanges. If you hold the position for long and it's at a hourly or 4 hour internal, your profits are going down the drain

Solution?

1. Avoid trading pump-and-dump shitcoins with low volumes. Everyone knows that they are going to dump anyway, and so almost everyone is trying to short.

[JeffBrad12]

I found out about funding rate when I was trying to delta neutral hedge.
Generally speaking funding rate becoming ridiculous only in new market and shitcoin market because price is very volatile and the gap between spot and derivative become wider.

I usually don't think about it that much when trading bitcoin. When trading bitcoin sometime the funding rate changes from negative to positive occasionally, kind of negating the effect.

[dwyane36]

When shorting shitcoins, especially those that have just been listed (they usually first pump for a few hours and then start dumping). It's very important first you look at the funding fees and the intervals the funding is going to happen (for some shitcoins it's hourly) and then the 24-hour turnover in USDT.

Funding fees can even go up to 2-3%, which is the cap for most exchanges. If you hold the position for long and it's at a hourly or 4 hour internal, your profits are going down the drain

Solution?

1. Avoid trading pump-and-dump shitcoins with low volumes. Everyone knows that they are going to dump anyway, and so almost everyone is trying to short.

When the funding fee suddenly jumps to a few percent and exchanges start charging it hourly, this is usually accompanied by high trading volumes, though there’s obviously not much liquidity on that trading pair. Personally, I most often see a -2% funding rate on exchanges during altcoin pumps, though there have been times when it reached -4%. At such times, it’s really better to avoid trading these assets, but that doesn’t mean you can’t make money on them. If you entered a long position before the pump or dump scheme began, you can profit from the funding fee. The key is not to be greedy and to close the trade in time.