Funding rate
A periodic payment between longs and shorts on perpetual futures that keeps the contract price close to spot. An extra cost or income for the position.
Definition
The funding rate is a periodic payment between longs and shorts on perpetual futures — a mechanism designed to keep the contract price close to the spot market. When funding is positive, longs pay shorts (and the reverse when it is negative), so the cost of holding a position grows regardless of the direction of price.
Example
You hold a long BTC perpetual for 24 hours while funding is positive. Every 8 hours (or according to the exchange’s rules) you pay the shorts a fraction of the position. With high leverage and high funding, a result that is “up on price” can still go to zero through the fees alone.
Anti-example / common mistake
Comparing perpetual PnL with spot without accounting for funding. The second mistake: joining the crowded side of the market “because of the trend” while ignoring that funding is already extremely expensive.