Funding and costs · Practical guide
Funding is a payment between long and short positions. It can be a cost or income: understanding who pays, how often, and what it amounts to annually helps you plan a trade.
Who pays whom
In perpetual contracts, funding helps keep the contract price close to the reference Spot index. With a positive rate, longs pay shorts; with a negative rate, shorts pay longs.
Positive funding is common, especially when buying pressure rises in the perpetual market. In bearish markets it may turn negative and reverse the payment direction. The sign depends on the price difference and each platform’s formula; simply counting how many people are long or short is not enough.
Longs pay Shorts
Common when the perpetual trades above the Spot index.
Shorts pay Longs
May occur when the perpetual trades below the Spot index.
How often is it paid?
Many contracts settle funding every 8 hours, but others do so every 4, 2, or 1 hour, or at other intervals depending on the asset, contract, and platform. That frequency may also change.
The contract screen shows the rate and time until the next payment. You normally pay or receive funding if you hold the position open when that interval settles.
How to calculate a payment
For a linear contract settled in USD, the basic calculation is:
Hypothetical example: a 1,000 USD position with a 0.01% rate generates a payment of 0.10 USD. With positive funding, a long pays it and a short receives it.
It applies to the position value, not just the margin you provided. For inverse or Coin-M contracts, you must also consider the settlement currency and formula.
For the long term, look at the annualized cost
Instead of focusing only on the interval or today’s rate, review the history of the same contract on the same platform. Compare 30-, 90-, and 365-day periods if data is available: the average helps with budgeting, while peaks and sign changes show how much the cost may vary.
Hypothetical example: if the sum of all rates settled over 30 days is +0.60%, its simple annual equivalent is +7.30%. That sign represents a cost for a long and income for a short, assuming constant exposure throughout all payments.
Add the rates with their signs and include all intervals, even if the frequency changed. This is a historical reference, not a prediction. If your position size changes, calculate the actual cost using its value at each settlement.
How to interpret 1%–10% annually
As a general reference, a historical cost between 1% and 10% annually on the position value may fit some strategies if their net results can absorb it. If it exceeds 10% annually, pay particular attention to long-duration trades: that cost can consume a significant part of the result.
Sustainability depends on leverage, duration, and strategy. For example, 5% annually on a constant 1,000 USD position is 50 USD. If you back it with 100 USD of margin, that 50 USD equals 50% of that margin. That is why the annual percentage alone does not indicate whether the cost is affordable.
Can grid profit cover funding?
Yes, it can cover and even exceed it when the bot configuration and price movements allow enough trades to complete. It depends on the range, grids, exposure, and funding rate. If there are few trades or the price leaves the range, the bot may keep paying funding while generating little grid profit.
Compare grid profit with the net funding paid, using the same currency and period. If fees are already deducted from the grid profit shown by the platform, do not subtract them again.
30 USD net grid profit − 8 USD net funding paid = 22 USD, before including the open position’s result. Covering funding does not guarantee the bot’s total result will be positive.
Funding fees explained in a video
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