I just realized something pretty interesting about how to make money from funding in futures. Usually, coins that swing a lot will have a high funding rate—and that’s the opportunity for us to take advantage of.

Why is that? It’s simply because the market isn’t balanced between Long and Short positions. When the imbalance gets skewed, the funding rate kicks in to help rebalance. Specifically:

When funding is positive (the Long side is too high), Long traders have to pay fees to Shorts. On the other hand, when funding is negative (there are too many Shorts), Shorts pay fees to Longs. Roughly every 8 hours, this fee is calculated and paid out.

Let me give a real example. If you open a $100 position with 50x leverage, the total volume is $5,000. With a funding rate of ±2%, the fee is 5,000 x 2% = $100. That’s not a small amount—especially if you open a “chill” position and don’t pay attention.

The way I often apply to “hunt” for funding fees is pretty simple. About 5 seconds before the funding is settled, I open a position in the direction that benefits:

If funding is negative, I go LONG to receive the fee. If funding is positive, I go SHORT. Right after I receive the fee, I close the position. The reason is that after the funding happens, the price often tends to move in the opposite direction, making it easier to get “swept” (hit by liquidation/price sweeps that close orders and sweep positions).

That’s how I use the funding rate to generate extra profit. Even though it’s not a huge amount, if you keep doing it every cycle, it can accumulate into a fairly stable source of income from futures.