Perpetual contracts have no expiry date like classic futures. To keep their price close to the spot market anyway, long and short positions pay each other a periodic fee: the funding rate. On most exchanges it's charged every eight hours.
Who pays whom?
When the funding rate is positive, longs pay shorts — the perpetual price sits above spot, and funding pushes it back down. When it's negative, shorts pay longs. The sign can flip multiple times a day depending on how the market is positioned.
The overlooked effect on liquidation
Every funding payment is debited from — or credited to — your position margin directly. If you're long and the rate is positive, your available margin shrinks with every payment — your buffer to liquidation gets smaller, with no price movement involved. If you're short during a positive rate, your buffer grows instead.
For short-term trades (minutes to hours) this effect is usually negligible. For positions held open across days, it can add up noticeably — especially at high leverage, where the starting buffer is already thin.
Funding impact = funding rate × sign (long = +1, short = −1) × number of intervals. At three payments a day (every 8h), that's already 21 individual debits or credits after a week.A practical example
At a funding rate of 0.01% per interval and a 3-day holding period (9 intervals), the effect adds up to about 0.09 percentage points — barely noticeable at low leverage, but a meaningful chunk of an already-thin buffer at 75x or 100x.
What this means for your position management
- At very high leverage and long holding periods, it's worth checking the current funding rate before you open.
- Extremely negative or positive funding rates often signal a one-sided market — beyond the pure cost, that can also be a sentiment indicator.
- Traders who actively position against the funding direction (on the side receiving payments) benefit twice: from a growing buffer and from the ongoing credit.