Funding rate:
so who pays whom?

The rule fits in one sentence

Positive rate: longs pay shorts. Negative rate: shorts pay longs. The amount = position notional × |rate|, charged or paid once at each settlement moment based on the position you hold then. When the contract trades above spot for a stretch (the market leans long) the rate is usually positive, and vice versa — its whole purpose is to "pull" the perpetual price back toward spot.

The three most common misconceptions

• "Funding is charged daily" — it isn't. Most perpetuals settle every 8 hours (some pairs every 4 or even 1), so you can pay or receive it 3 or more times a day. If you hold overnight, don't count it just once.
• "Just having an open order costs funding" — it doesn't. You only pay or receive it if you still hold the position at the settlement moment; close before settlement and you sit out that period.
• "0.01% is tiny, ignore it" — not under high leverage. Funding is charged on notional value, not on margin. At 20x leverage, a 0.01% rate equals 0.2% of your margin — three times a day, spiking in extreme conditions, that is enough to slowly grind through a high-leverage position.

FAQ

Is a negative funding rate a good thing?

For longs, yes — when the rate is negative, shorts pay longs, so anyone holding a long collects each period. But don't open a position just to "farm funding": the rate can flip positive at any time, and the P&L from price moves usually dwarfs any funding income. Treat it as a small plus-or-minus on your holding cost, not a primary source of return.

How often does the rate change, and where do I see it?

The rate is dynamic and shifts in real time with the balance of longs and shorts. Every exchange shows the "current rate" and a "predicted rate" on the contract page, plus a funding history page. The same pair often carries a different rate on different exchanges.

Does the exchange pocket this money?

No. Funding is a transfer between longs and shorts. The exchange only matches and settles it and takes no cut (trading fees are separate). That is the fundamental difference between funding and a trading fee.

How do I reduce what I pay in funding?

Three angles: first, avoid pairs and windows with extreme rates (a spiking rate usually also signals an overheated market); second, on short trades, exit before the settlement moment; third, keep leverage in check — because funding is charged on notional, the higher your leverage, the faster it eats into your margin. For the full mechanics, read the complete funding rate explainer.