The short answer
Funding is a small payment exchanged between longs and shorts every hour. It takes the place of the overnight swap, with two differences: it settles hourly rather than daily, and it runs in both directions, so at times you receive it.
Funding moves your equity, so it counts towards your drawdown limits like any other gain or loss.
Why funding exists
A dated future has an expiry that forces its price back to the real asset. A perp never expires, so something else has to hold the contract close to the underlying. That is funding:
When the perp trades above the underlying, longs pay shorts. Being long costs a little, being short earns a little, and the pressure pulls the price back down.
When the perp trades below it, shorts pay longs, and the pressure works the other way.
Funding passes between traders. It is not a UZO charge.
How it settles
Once an hour, every open position pays or receives funding on its current value:
funding payment = position value × that hour's funding rate
Position value is measured at the oracle price. The payment lands in your balance, and each position shows its running total. A position opened and closed between two settlements pays nothing.
Funding counts towards your drawdown
Funding you pay lowers your equity and moves you closer to your daily and maximum drawdown limits.
Funding you receive raises your equity, and counts as profit towards your target and your reward.
Because it settles every hour, a large position left open over a weekend can gather a meaningful amount whilst you are not watching.
It is rarely what breaches an account, but it is never nothing. Treat it as a real cost of holding.
How large is it?
Usually small. In a calm market the hourly rate sits close to its baseline of 0.00125%, about 0.01% every 8 hours. It rises when a market becomes one-sided, and rates far above that are rare and short-lived.
A worked example
You are long 0.5 BTC at $110,000, a position value of $55,000. At the baseline rate:
Held for | You pay about |
1 hour | $0.69 |
24 hours | $16.50 |
7 days | $115 |
If sentiment turns and the perp trades below the underlying, the same long position starts collecting funding rather than paying it.
Funding vs swap
Swap (Markets) | Funding (perpetuals) |
Charged once a day at rollover | Settled every hour |
Almost always a cost | A cost or an income, depending on how the market is positioned |
Set in advance for each instrument | Set by the market, and visible on every market before you trade |
Before you hold for days
Check the market's current funding rate in the terminal. For a quick trade it barely matters. For a position you plan to keep all week, a persistently high rate is a cost worth planning for, and a negative one is a small tailwind.
Where to go next
Read Hyperliquid and the prices you see for where the oracle price comes from, and Markets that never close: trading perpetuals 24/7 for what an always-open market means for a multi-day hold.
Need help?
Message us through live chat, or write to [email protected].