If you are trading with leverage, it is very important to understand the concept of funding fees. Because this fee is regularly deducted from your account as long as you keep your position open for a certain period. Payments are made in roughly 8-hour cycles, and in some market conditions, it can even occur 4 times a day.

The amount of the funding fee is based on a very simple logic. The larger the price difference between the spot market and the futures market, the higher the funding fee. For example, if a pair is more expensive on the spot side than on the futures side, it means that most traders are holding short positions. In such cases, the answer to the question "what is the funding fee?" becomes clearer: traders with short positions pay fees to those with long positions.

The funding rate we see on exchanges shows these metrics as a percentage. As the price gap widens or narrows, the rates also change. The larger the difference between the spot and futures prices, the more the funding fee moves toward negative. This transfer continues until the market reaches equilibrium.

Many traders use funding fee data not only to open positions at a given moment but also as an indicator of the overall market sentiment. Tracking this data can be helpful to understand which side the majority is on. But remember, the market often moves against the majority. Therefore, the funding fee can help determine your trend, but you should not rely on it as the sole decision-making criterion.