How do perp funding rates work?

A funding rate is a periodic payment between traders holding long and short perpetual positions. It is not usually a fee paid directly to the exchange; it is a mechanism that helps keep the perp price close to the reference market.

When the funding rate is positive, longs generally pay shorts. When it is negative, shorts generally pay longs. The direction, interval, and calculation can vary by venue, so read the platform’s current rules instead of assuming one standard.

Funding can become expensive when positioning is crowded. Include it with trading fees, spread, and slippage when you think about the cost of holding a position.