That Money Draining From Your Position Is the Funding Rate
Why funding rates exist, who pays whom depending on direction, and how much it adds up to on longer holds.
Wait, Why Did Money Just Leave My Balance?
If you've held a futures position for a few days, you've probably noticed small unexplained deductions from your balance that aren't trading fees. That's the funding rate.
A funding rate isn't a fee collected by the exchange. It's money that periodically changes hands between traders holding long positions and traders holding short positions.
Why Funding Rates Exist
Perpetual futures never expire, so the futures price can keep drifting away from the spot price. The funding rate exists to pull the two prices back together.
When the futures price trades above spot (longs dominate), the funding rate turns positive and longs pay shorts. When futures trade below spot, shorts pay longs instead.
Funding rate 0.01% (every 8 hours), position size $10,000, long position held for 7 days (21 periods): each period you pay 10,000 × 0.01% = $1, for a total of $21 paid by the long to the short.
Why This Cost Adds Up More Than You'd Think
1. It repeats every 8 hours — 3 times a day, roughly 90 times a month. Each charge looks small, but it accumulates into a real number.
2. It scales with position size — the bigger your position (especially with leverage), the bigger the funding payment at the same rate. Leaving funding out of your P&L means your real net result comes in lower than expected.
3. It grows when the market leans hard one way — when sentiment gets extreme in one direction, the funding rate spikes with it. Holding a long through an overheated bull market is a common way this cost quietly piles up.
What to Check Before Holding a Position Longer-Term
For quick trades, funding rate impact is minor. But if you're planning to hold a position for days or weeks, funding needs to be part of your P&L math from the start.
On the flip side, if you're on the side receiving funding (the direction opposite a strong price premium), just holding the position quietly earns you small amounts over time. Some strategies target this directly — but the funding rate can flip direction at any time, and that risk has to be part of the plan.
Enter how long you plan to hold and the current funding rate to see the actual expected cost first.
Go to the Calculator →Where This Leaves You
Funding isn't a hidden cost — it's a calculable one. Knowing position size, funding rate, and holding period tells you exactly how much will change hands before you open the trade.
Before your next position, plug your expected holding period and the current funding rate into a funding calculator. Once you see the number, it's clear why funding belongs in your P&L plan.