When trading margin and futures, there's one thing you need to pay attention to: the answer to "what is the funding fee" is actually quite important. It is a cost you pay at regular intervals as long as you keep your position open. It is calculated roughly every 8 hours, and paying three times a day is normal. In rare cases, it can be paid four times.

So, to fully explain what the funding fee is, this fee actually arises from the price difference between the spot market and the futures market. If the parity is more expensive on the spot side, it means that short positions are dominant. In this case, the funding rate turns negative, and those with short positions pay, while those with long positions receive.

The wider the price gap, the more the short dominance increases, and the funding rate moves further into negative territory. Thanks to this mechanism, the market tries to balance itself. This payment flow continues until the price difference closes.

The funding rate shown by the exchange gives us a percentage representation of these metrics. It’s a great data point for understanding the distribution of positions in the market. But be careful, the market often moves contrary to the majority. Instead of making trades based solely on the funding rate, it’s smarter to use it as an indicator. That is, rather than doing the opposite of what it suggests, see it as a tool to understand market dynamics.