Funding

A traditional futures contract has a settlement date. On that date the contract and the underlying asset must agree, because one is exchanged for the other. That deadline is what pulls the two prices together as expiry approaches.

A perpetual has no such date. Nothing ever forces settlement, so nothing mechanically forces the contract price back to spot. Left alone, a perpetual would simply drift. If most traders wanted to be long, buying pressure on the contract would push it above spot and it could stay there forever. The contract would stop tracking the asset it is named after, and would become a market in its own sentiment.

Funding replaces the expiry deadline with a continuous cost. Instead of forcing convergence once, it charges the crowded side a small amount over and over, and pays that amount to the other side.

Who pays whom

Funding is paid between traders. When the contract trades above spot, the funding rate is positive and longs pay shorts. When the contract trades below spot, the rate is negative and shorts pay longs. The payment is periodic, and the amount scales with position size, not with margin. A large position opened on small margin pays funding on the full notional.

We never receive funding. It does not touch our revenue. Our only charge on real trading is 1 basis point, 0.01%, on routed volume, and that is separate and disclosed on the fees page. Funding moves from one trader's account to another trader's account. If you are on the light side of a crowded market, you are the one being paid.

Why it works

The mechanism is economic, not enforced. If longs must keep paying to hold a position, holding a long gets more expensive the further the contract sits above spot. Some longs close. Some traders open shorts specifically to collect the payment and hedge the exposure elsewhere. Both actions push the contract price back down toward spot. When the gap closes, the rate falls toward zero and the pressure stops.

Nothing about this guarantees the contract tracks spot exactly at every moment. It guarantees only that a persistent gap has a persistent cost attached to it, and that someone is being paid to close it.

Funding is a real cost of holding a position

Traders tend to think about entry, exit and liquidation, and to treat funding as background noise. Over a short trade it usually is. Over days or weeks in a market where the rate stays positive, it is not.

Read that second line carefully. Leverage multiplies funding exactly as it multiplies profit and loss. A position held on 20x leverage pays twenty times the funding of the same margin held unlevered. A rate that looks negligible against your collateral is not negligible against your notional.

A directional view can be correct and still lose money if it is expressed as a long held through a long stretch of positive funding. That is a normal outcome, not an unusual one. Before holding a levered position across many funding periods, check the current rate and its recent history on the position, and treat the running total as part of the cost of the trade.

The other ways demo flatters a strategy

Missing funding is one simplification, and it is worth knowing the others so that a good demo result is read correctly. In demo:

• Funding is never charged and never received.
• Fills are instant, complete and have no slippage. Order book depth is not modelled, so a size that would move the market fills at the same price as a small one.
• Liquidation uses a fixed rule, loss reaching 90% of margin, with the remaining 10% returned to the balance. Real liquidation is set by the venue's risk engine using a maintenance margin that varies by asset and by position size.

Demo is useful for learning the mechanics: how leverage scales exposure, where liquidation sits, how fees accumulate across many trades. It is not a backtest, and a profit curve produced there should not be treated as a forecast. See demo trading for the full list of what the demo engine does and does not model.

Funding on real trading

Real trading at /trade charges and pays funding periodically, between traders, on every real market. Practical points:

1. The rate is not fixed. It moves with the gap between the contract and spot, and it can flip sign while you hold.
2. Payments settle against your collateral. A position that never moves in price can still reduce your account balance through funding alone, and a smaller balance sits closer to liquidation.
3. Being paid funding is not a strategy on its own. Collecting a positive rate as a short means holding directional risk that can lose far more than the payments are worth.

The current rate and your accrued funding are shown on the position. Check them before you assume a trade is flat.