With Perptual trading, when you have a position, the longer you let that position opens, the more interests you will have to pay for that exchange. Usually exchanges will have different shifts of funding rates within every 24 hours. It can be 3 or 4 shifts every day.
So even if your position at the end when you close it at profitable exit price, the longer you let that position opens, the less interest you will get at the end because the more in interest you will have to pay for exchange.
Isn't the funding rate dynamic in perpetual swaps? Like longs pay shorts and shorts pay longs depending on the market conditions and the position one has opened?So even if your position at the end when you close it at profitable exit price, the longer you let that position opens, the less interest you will get at the end because the more in interest you will have to pay for exchange.
So how will rates reduce as time goes on if market conditions are what mostly dictate the funding rates and who is going to get paid and who is paying?
Help me understand
Those that open a long position or short position can be given the funding or deducted from them. If the funding rate is positive, which means the perpetual contract price is higher than the mark price of the asset the trader opened a position for, in this case, those that open long position will pay those that open short position. If the funding rate is negative, those that open a short position will pay those that open a long position.
If you re interested to know more about funding rate, you can read this: https://www.binance.com/en/blog/futures/what-is-futures-funding-rate-and-why-it-matters-421499824684903247