What is Funding Rate?
Funding rate is a periodic payment mechanism used by perpetual futures contracts. It helps keep the perpetual price near the spot market by transferring value between long and short traders.
Funding Formula
The basic formulas are:
Total Funding = Notional × Funding Rate × (Holding Hours ÷ Interval Hours)
Annualized Funding Rate = Funding Rate × (24 ÷ Interval Hours) × 365
Positive funding usually means longs pay shorts. Negative funding means shorts pay longs. Funding is charged on position notional, not on leverage.
Why Funding Matters
Funding can quietly eat into trade edge if you hold long enough. A strategy that looks good on entry can become poor once funding drag is included.
- Shows real holding cost of perpetual positions
- Helps compare trade edge against carry drag
- Makes leverage risk easier to understand
- Useful for swing trades and basis trades
How to Use This Calculator
- Enter your entry price
- Enter your position size / notional
- Enter the funding rate per interval
- Choose long or short
- Enter holding time and interval length
- Click calculate
Frequently Asked Questions
A positive funding rate usually means longs pay shorts. It often appears when the market is crowded on the long side.
Funding is charged on notional size, so leverage does not change the funding formula itself. It only changes how much margin you post.
Yes. Negative funding means the payment direction flips, so the side that normally pays may receive funding instead.
Funding is usually charged at fixed intervals, often every 8 hours on major perpetual futures markets, but the exact schedule depends on the exchange. This is why the interval input matters so much in the calculator.
It converts a short interval rate into a yearly carry number, which makes it easier to compare against expected trade returns.
Focus on position size, holding time, and whether the trade edge can survive funding drag. Do not treat funding as a standalone signal.