🌊 Do you understand the Funding Rate?
The case of $RIVER
If you trade in the Futures market, there's a number that could be your best ally or your worst enemy: the Funding Rate.
❓ What is it?
In perpetual contracts (which don't expire), the funding rate is the mechanism that keeps the futures price aligned with the actual market price (Spot).
It's a payment between traders: the exchange does not keep this money.
It's paid/charged every 8 hours (in most pairs on Binance).
🔍 Suppose there's massive euphoria and everyone wants to buy:
1️⃣ Positive Funding (+): If the futures price of $RIVER is higher than the spot, those in LONG positions pay the SHORT positions.
Tip: If you hold a Long during periods of high euphoria, keep in mind this cost will reduce your profits!
2️⃣ Negative Funding (-): If the futures price of $RIVER falls below the spot, those in SHORT positions pay the LONG positions.
Opportunity: Here, Longs are "earning" from holding their open position.
💡 How to use it to your advantage?
Market Sentiment: An extremely high funding rate in $RIVER often indicates the market is "overbought." Be careful! This often precedes a correction or a long squeeze.
Arbitrage: Many traders look for coins with consistently negative rates to open long positions and simply collect the funding rate while the price stabilizes.
Risk Management: Before leveraged trades, check the funding countdown clock. If only 5 minutes remain and the rate is very high, you might want to wait until after the payment.
What about you? Do you usually check the Funding Rate before opening a position? 👇 I read your comments!
📊 Not investment advice. Only educational content.
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