Mama 💜 @TheWeb3Mama - Twitter Profile

Have you ever closed a trade in profit but noticed your balance did not reflect what you expected? One thing that can affect this is the funding rate. I will be honest. I also experienced it and ignored it. As long as my trade was showing profit, I did not think there was anything else I needed to check. I was wrong. Until I noticed an unexpected deduction from funding fees. The funding rate is not a fee collected by the exchange. It is a periodic payment exchanged directly between traders holding long and short positions in perpetual futures contracts. The exchange only facilitates the process. If the funding rate is positive, traders in long positions pay traders in short positions. If it is negative, traders in short positions pay traders in long positions. Its purpose is simple. It helps keep the price of perpetual futures close to the spot price. Here is a simple example. Let us say you open a long position and close it with a $50 profit. While holding the position, funding payments are applied periodically, often every eight hours depending on the exchange. If, over that period, you pay $0.35 in total funding, your final return becomes $49.65 before trading fees. Now imagine the funding rate is negative instead. You still make the same $50 profit, but instead of paying funding, you receive $0.35 while the position is open. Your return becomes $50.35 before trading fees. The difference is small on a single trade. But if you are trading larger positions or holding trades across multiple funding intervals, those payments can accumulate significantly. That is why checking the funding rate has become part of my routine before opening a trade on @EVEDEX. So, should a positive funding rate stop you from taking a trade? Not necessarily. It simply means you should understand what you are paying or receiving before you hit the buy or sell button.