Main Guide


🔹 1. What is Funding Rate?

In perpetual futures, there is no expiry date.
So exchanges use a funding rate to keep the futures price close to the spot price.

👉 Every few hours (usually 8h), traders pay each other.

  • If funding is positive → Longs pay Shorts

  • If funding is negative → Shorts pay Longs

This is NOT a fee to the exchange. It’s trader-to-trader payment.

🔹 2. Why Funding Exists

Without funding:

  • Futures price can go far above or below spot price.

Funding forces balance:

  • Too many longs? They pay → discourages longs

  • Too many shorts? They pay → discourages shorts

It keeps the market stable.

🔹 3. How to Read Funding Like a Pro (Very Important)

Funding tells you where the crowd is trapped.

FundingMeaningMarket SituationSmart Move+0.01% to +0.03%Normal bullishHealthy uptrendSafe longs+0.05% to +0.15%Overcrowded longsGreedy marketLook for dumpNegative smallNormal bearishHealthy downtrendSafe shorts-0.05% to -0.15%Overcrowded shortsFear marketLook for pump

👉 Extreme funding = reversal soon

🔹 4. Funding + Open Interest (Power Combo)

Never see funding alone. Pair it with Open Interest (OI).

  • High funding + rising OI → new longs entering → dump setup

  • Negative funding + rising OI → new shorts entering → pump setup

  • Funding high but OI falling → longs closing → pump soon

This combo shows trap direction.

🔹 5. Funding Squeeze (Big Money Move)

Whales wait for extreme funding.

Example:

  • Funding +0.12%

  • Retail all long

  • Whale dumps → long liquidation → big crash

Or opposite for shorts.

This is called a funding squeeze.

🔹 6. Funding vs Liquidation

Funding shows who is paying.
Liquidations show who got trapped.

Smart traders enter before liquidation happens by reading funding.

🔹 7. Best Places to Check Funding

You should check funding before every trade:

  • Binance Futures

  • Bybit

  • Coinglass (very important)

  • TradingView (funding indicator)

🔹 8. Funding Trading Strategy (Simple)

Step 1: Check funding on Coinglass
Step 2: Check OI rising or falling
Step 3: If funding extreme → trade opposite direction
Step 4: Wait for squeeze → take profit on liquidation spike

🔹 9. Golden Rules

✅ Don’t long when funding is very high
✅ Don’t short when funding is very negative
✅ Extreme funding = smart money preparing opposite move
✅ Funding is more powerful on BTC, ETH, SOL, major coins

🔹 10. Example (Real Scenario)

BTC at $70,000
Funding = +0.10%
OI rising fast

This means: Everyone long → Market will likely dump to liquidate them.