If you trade perpetual futures on Binance, you'll frequently see a number called the "funding rate" — sometimes positive, sometimes negative. This number directly affects your holding costs, so it's essential to understand. Register on Binance and download the Binance APP — you can see the real-time funding rate on the futures trading page.
What Is the Funding Rate?
Perpetual futures have no expiration date, which means their price can diverge from the spot price. The funding rate is a mechanism that keeps the futures price anchored to the spot price — it does this by having longs and shorts periodically pay each other.
Simply put: the funding rate is the "rent" for holding a position.
How Is It Charged?
Binance perpetual futures settle funding fees every 8 hours, at 00:00, 08:00, and 16:00 UTC+8.
When the Funding Rate Is Positive (e.g., +0.01%)
- Longs pay shorts
- Indicates the market is leaning bullish, with more long positions
When the Funding Rate Is Negative (e.g., -0.01%)
- Shorts pay longs
- Indicates the market is leaning bearish, with more short positions
How Is the Fee Calculated?
The formula is simple:
Funding Fee = Position Value x Funding Rate
Example: You hold a 10,000 USDT long BTC position, and the current funding rate is 0.01%.
Funding Fee = 10,000 x 0.01% = 1 USDT
This means at settlement time, you'll pay 1 USDT to the shorts.
How Does the Funding Rate Affect Trading?
Short-Term Traders
If you only hold positions for minutes or hours, the funding rate impact is small. But if you happen to be holding a position at settlement time, you'll be charged or credited.
Long-Term Holders
If you plan to hold for several days, the cumulative effect of funding rates becomes significant. Assuming a 0.01% charge every 8 hours — that's 0.03% per day, nearly 1% per month. With a large position, that's a substantial amount.
How to Use the Funding Rate
Arbitrage Strategy
Some traders specifically do funding rate arbitrage: when the rate is high, they simultaneously open a spot long and a futures short to earn funding payments. This strategy is relatively low-risk but returns are limited.
Gauging Market Sentiment
- Consistently positive and high funding rates: Market may be overheated, correction possible
- Consistently negative funding rates: Market sentiment is low, potentially near a bottom
Where to Check the Funding Rate on Binance
- Open the futures trading page
- Next to the trading pair name, you'll see the current funding rate and countdown to next settlement
- Tap the funding rate number to view historical funding rates
Practical Tips
- Check the funding rate before opening positions — be cautious about going long when rates are too high
- If you don't want to pay funding fees, close your position before settlement time
- Factor funding costs into your trading expenses for long-term holds
- During extreme market conditions, funding rates can spike to 0.1% or higher — watch out for this risk