Funding rates help perpetual futures track their underlying index by transferring payments between long and short holders. They are not charged the same way as a normal trading fee, but they can become a major holding cost.
Who pays funding?
When funding is positive, longs commonly pay shorts; when negative, shorts commonly pay longs. Payment depends on the position held at the funding timestamp. The displayed rate may be estimated until the interval is finalized.
Basic calculation
A simplified payment equals position notional multiplied by the funding rate. A $10,000 position at 0.01% implies $1 for that interval. Repeated intervals, leverage and changing notional can make the cumulative amount significant relative to collateral.
How to check funding
Review the current rate, next timestamp, historical rates and contract specification. Different markets can have different intervals. Confirm whether funding appears as a debit or credit in account history rather than judging only unrealized PnL.
Using funding in a decision
High positive funding may make a long expensive and can reveal crowding. A short receiving funding still carries price risk that can overwhelm the payment. Funding arbitrage strategies require matched legs, liquidity and careful treatment of fees and basis changes.
Cost-control checklist
- Estimate funding for the intended holding period.
- Compare alternative contracts and spot exposure.
- Reduce unnecessary notional.
- Track rate changes instead of assuming stability.
- Include fees, spread and slippage in break-even calculations.
Funding should be planned before entry, not discovered after a profitable-looking trade produces a disappointing net result.
Funding-cost example
A $20,000 position paying 0.03% every eight hours would incur $6 per interval, or $18 over one day if the rate stayed unchanged. With only $1,000 of margin, that daily cost equals 1.8% of collateral before price movement and trading fees. Rates can change, so this is a scenario rather than a forecast.
Frequently asked questions
Is funding paid to MEXC?
Perpetual funding is generally transferred between position sides, subject to product rules.
Can funding be avoided?
Closing before a timestamp may avoid that interval but adds execution costs and market risk.
Does negative funding make shorts free?
No. Shorts may pay funding and still face unlimited upward price pressure.
Final takeaway
Convert every rate into currency for the planned notional and duration. Judge strategies by net return after funding, fees and slippage.