How funding rates work on perpetual futures, and what they really cost

Perpetual futures never expire, so exchanges need another way to keep their price close to the real (spot) price. That mechanism is the funding rate: a small payment that passes between long and short traders every few hours.

It's easy to ignore on a quick trade. On a trade you hold for days, it can quietly become the biggest cost you pay.

Who pays whom

• Positive funding rate: longs pay shorts. This usually happens when the perp trades above spot because more people want to be long.
• Negative funding rate: shorts pay longs.

The exchange doesn't keep the money. It moves between traders. You only pay or receive it if you hold a position at the moment funding is settled.

How often it's charged

On most large exchanges, funding is settled every 8 hours, so three times a day. Some contracts settle every 4 hours or every hour, especially in volatile markets. Check the contract details on your exchange; the interval changes what a given rate costs you.

How to work out a funding payment

Funding payment = position value × funding rate

The position value is the full size of the position, not your margin. That's the part people miss: with leverage, you pay funding on money you didn't put up.

Example

A $10,000 long at a funding rate of 0.01% per 8 hours:

• Per settlement: $10,000 × 0.01% = $1.00
• Per day (3 settlements): $3.00
• Per week: $21.00
• Per 30 days: $90.00

That looks small until you compare it with what's at stake. If you opened this position with $1,000 of margin at 10× leverage, 30 days of funding is 9% of your margin. And 0.01% per 8 hours adds up to almost 11% a year of the position's value.

When rates spike

In strong trends funding can jump well above normal. Here's the same $10,000 position at higher rates:

Rate per 8 hours	Per day	Per week	Per 30 days
0.01%	$3	$21	$90
0.03%	$9	$63	$270
0.10%	$30	$210	$900

At 0.10%, a month of funding costs 9% of the whole position, which is almost your entire margin at 10× leverage.

Why it matters for your risk

Say you size trades so a stop-out costs $10 (1% of a $1,000 account, see the 1% rule). Holding that $10,000 position for a week at 0.01% costs $21 in funding. That's more than twice your planned risk, before the trade has won or lost anything.

In R terms (see what is an R-multiple), that's −2.1R of cost on a trade where you only meant to risk 1R.

Practical habits

• Check the rate before you enter. It's shown next to the price on every exchange, with a countdown to the next settlement.
• Know which side is paying. Holding a long through a high positive rate is expensive; holding a short through it earns you funding.
• Include funding in your P&L. Your exchange reports it separately from trading fees. Your real result is price P&L minus opening and closing fees, plus or minus funding.
• Be careful with long holds on high leverage. Funding is charged on the full position value, so high leverage makes it a larger share of your margin.
• Remember it changes. The rate at entry isn't the rate you'll pay next week.

Tracking it

TradeTurtle has a funding fee field on every trade next to the opening and closing fees, so your journal shows what funding actually cost you over time. The stats show total fees paid, so you can see how much of your edge goes to costs.