Topic: Funding rate for make profit - page 2. (Read 281 times)

Maybe we should know this and understand the rest part of it all that when we are trading bitcoin, we are on a low level risk but when we invest to trade on other coins, we are gambling  to me which is far higher than taking risk itself, maybe it's also an avenue for you to learn and prepare yourself more better for the future, if we are investing, we should use the rate we can afford to loose especially when on altcoins, their trading could loose position at anytime and the value can go down completely before we realized we made a wrong pair for our trading.

I would go with funding arbitrage strategy. If longs pay shorts, you go short on futures (use as little leverage as possible to make sure you wont be liquidated) and at the same time you buy on spot with the same position size. You are net 0, so you are not exposed to currency risk (as long as you will not get liquidated) but you earn on funding and price spread (very often when there is a big funding there is also big price spread)

You can also compare funding on different exchanges. For example if funding on binance is -1.5% and -0.8% on bybit, you can go long on binance (to get 1.5%) and short on bybit (you pay 0.8%). your position is net zero, but you get 0.7% from funding spread.

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.

In perpetual futures contract trading, traders never neglect risk management; however, for position traders focused on maximizing profit, the approach can sometimes lead to the elimination of risk management, thereby revealing motives driven by greed, reminiscent of gambling. Making money from the funding rate harvesting in the derivative market involves the 99% figured potential risk so, better avoid it (As I do  ) and prefer a decent trading mode free of greed.

There is actually a thread that discussed about Funding fees and I already talked about it but i forget when

and yes you can actually make a profit by harvesting the funding fee but your eyes need to stick to the monitor to see how the price is moving. and usually, the price tends to move against the funding rate.

So when the funding rate is big positive like 5% and the countdown rate is less than 30~20 minutes you can actually see that the price is head to down because there are lot of people shorting position and when the funding rate is restarted price back to normal and vice versa.
and from that, you can gain profit like you said but funding fee farming is not happening every day you can actually check the funding rate here https://www.binance.com/en/futures/funding-history/perpetual/real-time-funding-rate is real-time

Trying to make money out of the funding fee is more of gambling IMO because
1. It's dynamic
2. The market can either go against your position or not.

Just the other day some trader was complaining about how rampant the funding fee was for the shitcoin perpetuals on MEXC. This is one of the reasons I don't even want to trade on MEXC. It is complete chaos over there, with very volatile shitcoin going for as high as 200X with barely any liquidity. Now who provides the liquidity? I still feel as though at times, traders could be trading against the exchange unknowingly and the exchange will always make sure they win.

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?