Funding rate for make profit
Funding rate for make profit
Two days ago, I opened a position with a very risky volatile coin at some minutes to its funding rate fee, the coin was having -1.98% funding rate fee. You can see how risky that is which I can not call trading but gambling.
After I opened a long position, luckily I was able to have unrealized PnL of $67, but it was just some seconds remaining to another 8 hours funding rate time to start counting down. I waited and all that I noticed in less than a second after the next eight hours began was that the $67 profit that was seen suddenly droped to $4.
I was paid the funding fee which made me to make almost $60 in total. I mean the profit from trading is around $3 if trading fee has been deducted while the remain profit was from funding fee.
I noticed that traders are using the funding fee to manipulate the market, although we can not call it manipulation too because they want to make profit, but they can also lose. That is trading. If you are trading these less volatile coins with high funding fee, you will noticed what that I am talking about.
Are you using funding fee to make money from the derivative market? If so, what is the most possible way have you used it to make money successfully or it is not actually working?
Hmm, well Op you’ve reflected on a very important topic for perpetual futures contract traders, I never used to endorse perpetual futures contract trading for a particular set of reasons, To guide newbies, so they can be emotionally stronger with the spot market and religious factor as well. Still on the basis of my own knowledge, OP, funding rate harvesting is purely based on the Balancing Mechanism and funding Fee payouts.
As per your case in the Long position, the funding fee pouts were (Long pays to Short), as per your Unrealized PNL was 67$ before the funding fee payouts, and due to the volatile market and periodical adjustment (Fee payout), you’ve charged for the 60$ funding fees, but what you’ve noticed that traders are using funding rate to manipulate the market, in this case, I won’t say they are manipulating the market they are doing the “funding rate arbitrage”, most of the people don’t really prefer this strategy as you also consider it’s not trading (Gambling) particularly if we take a close look to the risk management.