A thread on Funding 101 :

This guide will help you to understand Funding and will show you how you can use this to your trading advantage.

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1.

So before we begin, it is best you first understand what a Perpetual futures contract is :

A Perpetual Contract is a contract that doesn't expire. Unlike Futures contracts in the traditional markets that have an expiration date ✅
2. So how does a Perpetual contract come into the topic of Funding?

"The Funding is the difference between the price of a Perpetual contact and the Mark price of the asset"
3. Funding can be negative and positive and this itself can have an impact on the trader depending on whether they are long or short on the contract.

Funding = Negative when the Perpetual is lower than the Mark .

Funding = Positive when the Perpetual is higher than the Mark.
4. So how does negative and positive funding affect someone who is trading ?

Negative funding = Short positions pay the long positions ✅

Positive funding - Long positions pay the short positions ✅
5. So how does this affect traders ?

For example : If your in a high leveraged long trade and funding is positive, then your paying the shorts for there positions. So if the price isn't increasing, but dropping instead, then you have a higher chance of being liquidated.
6. And this is my understanding of how Funding works. So you do want to have funding on your side when it comes to trading in a Perpetual position.

If you are long, you want funding to be negative ✅

If you are short, you want funding to be positive ✅

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