Topic: Funding rate for make profit (Read 308 times)

Have you read through the thread? There are so many opinions from different members about the possibility of profiting or not. It's up to you to choose whether you can try profiting out of it or not, but one thing for sure is the odds will mostly be against you.
Maybe arbitraging, but you might need a good arbitrage trading bot to help you along with a good amount of funds on different exchanges.

The OP is asking too how to make consistent profit on funding rater after experiencing good profit on it.

Funding rate/fee is the fee which the losser side pay to the winning side on trading. It’s very hard to make a consistent profit on this fee since it’s dynamic while placing an order on the positive side of the fee will give you more risk of losing on your original trade since it’s an indicator of the trend.

Funding rate is too small and you can only have a decent profit from it by using huge capital or leverage to increase your margin size. I believe you can only maximize the use of it if you have enough capital to dictate the market orderbook but this is clearly manipulation. Just do the normal trade and consider funding rate as extra bonus on your position.

On centralized manipulated exchanges I would stay miles away from using Funding fees to actually make any profit. It's because exchanges could easily change the direction of the fees based on their arbitrary decisions to get more profits. Also if you want to make profits in this way you have to study the market on a macro level. You have to continuously keep looking at the order book, the sentiment of the market, the types of trade which have been recently hit in the past trades. From what all this sounds like this definitely isn't worth the pain that it would give you.

How can I profit? Which is the first step?

It is one of ways to get profit from trading and the market but I agree with you, it's risky to chase profit with funding rate.

The market is changing quickly and funding rate is more slowly with its changing intensity, each 8 hours. If we can not close our positions from trading, to have profit or a bit worse but still good, to have a draw, it's more risky if we let a position opens just because we feel an upcoming funding rate will give us profit.

Not me but I see a lot of whales are doing this, they are playing around and making profits off the funding rate.
If you just understand easily these funding fees, I believe you can make some profits on it especially if you are using different exchanges with different funding rate and that's the time you can make also profits but be careful, it's still risky.

From what I discovered some people, perhaps with the help of bots or high frequency trading, have a chance of getting some profit out of funding rate by arbitraging across different exchanges where the funding rates are different. The task is to look for token perpetual contracts who funding rates have gone wild.

For example, at one point the funding rate in binance would consistently be as low as -2.5% across different hours while on bybit it would somewhere more than -2% (Like -1.5%). Every time the funding minute passed, there would be an immediate shorting spree leading to a long red 1 minute candle (since people would now enter short positions without worrying about getting taxed that funding fee, at least for the next 8 hours) and then shortly the price would spike back upwards.

The logic would be to open a short position in Bybit (shortly before the fund minute) and open a long position on Binance at the same time, using the similar margin.
1. if the price went down in that minute, the short position in bybit would be in profit, but would have a hefty 1.5% funding fee deducted from it. The long position in Binance would be in a loss, but have that 2.5% funding fee added to it. Both the take profit and stop loss which have to be similar cancel out. The difference which is 1% from the fund fees would be the profit.


2. If the price went up in that minute, the long position in Binance would be in profit and also have an additional 2.5% funding fee added to it and the same logic about TP and SL would apply here

Indeed. We must not rely our trade in funding rate because it's not guarantee that you will always win. If we rely with funding rate but the market sentiment is declining, funding rate can't stop it. Maybe the best way to do is to use this as confluence in our strategy.

However, if he is profitable already with the funding rate tactics I think he should continue doing that, because even traders who had the best strategy got from his mentor will also fail. So keep doing what makes you profitable because that is the main reason why we are here in trading.

I agree. We must be flexible with our actions that serve the ultimate goal, protecting our capital first. Profit from trading, profit from funding rate are all not important. They are second or third or lower important thing when we are trading. Profit is good, we all want to get profit but if we only think of profit, and forget about our initial capital, it's wrong, risky and can cause serious loss.

Funding rate is derivative profit or loss for our trading. Our focus should be closing our position when we feel no longer safe as market shows dangerous signals. Exit it and if luckily enough, to gain small profit from funding rate, we can take it. But if we open our trading positions because of funding rate, because we think it can help us to get profit, it's very risky.

I agree that these type of things are quite risky, if you are insisting that you want to do this then you can do it, that's your own deal and your own money so you are free to do this, but nothing would make me do something like this personally, probably because I do not trust the market enough. No matter how good it looks, I will always consider that as a big risk and there is no need for that at all.

I personally would rather have something that would be a bit more different in the end. I know that these type of things are done by a lot of people but I am not one of those people because of the risk OP basically talked about. He literally talks about the big risk, which is why I rather not do it at all.

Regarding the TRB which was posted above, look at how much higher it went when the funding rate was already peaked. Basically people shorting which got squeezed. Looks amazing doesn’t it but how do you apply it to make a profit? You really can’t.

It kept squeezing and squeezing and squeezing, when would you enter a short? Or when would you enter a long? Both would of been difficult to time. So the funding rate helps but it’s not the entire picture. Maybe use technical analysis to help you on when to enter the trade.

Indeed. It is pretty hard to catch the funding if you targeting only on funding. This is more like an instrument that helps to find the upcoming pump and a juicy reward for the ones who hold a long position for the majority of the pump which can be up for up to a week.

You need to see the whole market picture and not focus on funding only.

To manipulate the market, market makers use more tools than funding rate. I consider funding rate as one of consequences of market manipulations. It is not a cause of market manipulation but it is one of results from manipulation.

Funding rate is like supply and demand of amateur traders with loan in the market. It shows their demand and sentiment, greed or fear. You can look at funding rate to guess the market sentiment but it is not enough to have an overview of the market. Funding rate, trading volume, zoom out the chart to see a general trend of the market.

Depends on the time frame the trader used and whether it was spot or derivatives. Entering a position with a safer SL would mean one would have to do it much earlier, way before the funding rates became abnormally high/low.

People still got REKT on shorter timeframes and futures basing on the liquidations data.

I agree. Market is manipulative and generally, it all is about guessing the market maker's actions. This is obvious pretty risky and you need control your potential losses. But there is not so much to do during the flat market rather than researching the pumps

Regarding TRB, the overall uptrend was not broken. Setting SL beyond previous lows could help.

I get your point, that is not easy, though. Maybe you can pull this off on a spot market with a stop loss that is not tight but with futures chances of hitting a stop loss or liquidation are high. Coins with abnormal funding rates tend to become very volatile, as some market players have found away of manipulating the market to gain advantage through the funding rate.

A very good example is TRB. I have been following it for quite some time. Every time the funding rate is up the roof we have huge swings in both sides sweeping up some liquidity especially towards or shortly after the 8-hourly funding fee interval

Funding rate is one of the coolest thing when it comes to searching for upcoming pumps. But you need to use it in combination with another forms of analysis.
Basically, highly negative funding is indicating the high sell pressure at the moment and since the price is not going down then some market maker is keeping the price in a certain range. It happens once the price of some coin is going up, some traders are catching a falling knife and go short. Then, their stop losses liquidations are becoming fuel for upside to continue which is used by the market maker. It often works like this with the middle tier altcoins and you need to control your RR ratio in such trades.

Another tip is that you may check if the team of some particular coin got a partnership with some marker maker and you may check the MM's portfolio. There you may easily find their typical pump patterns and try to find a coin for upcoming pump. This worked pretty good on DWF Labs.

I played around with this in the past. There is no real way to profit here. When you are entering a trade like that it means that there are massive shorts and it can go against you alot before there is a short squeeze. So depending how early you enter can put you in massive negative PnL.

You got lucky but usually you would collect the fee and the trade would start to go against you. Some people close their position right after the funding fee. So seconds after you would see a dip since longs close.

Not worth it

Of course, you are not going to win all the trades. This is where risk management comes in, and I put risk management far in front of almost anything in trading. When you are gambling, it's hard to have a proper risk management plan because you don't even know what you are doing. You are simply at the mercy of the funding rate or probability.

Instead of doing the future trading,you can directly do the gambling.So you analysis and understand their is the probability of loss in the gambling.But in future trading,you never understand the fact you may lose the entire amount.If the market is totally against the prediction,then all the money you staked and the money you keep for liquidity will be the loss.The trader in this field over decade will have a try of the future trading once in their life time.With my experience and my friends experience most of the people had loss their money at the last.