Financing rate on Binance

Funding system on Binance is launched to reduce the rascorrelation of instruments. The funding rate includes 2 components. You can compare them in the table.

Current value and rate history

Binance customers can analyze the change in the funding rate. Traders use this data to determine pivot points. If the funding rate on Binance is greater than zero, it indicates that many participants do not see growth prospects. If it does occur, it will lead to mass liquidation – “short-squeeze”. You can get the history of changes in the indicator as follows:

1. Go to the futures terminal and select a cryptocurrency pair.
2. Click on the current fanding value in the upper right corner.
3. Select the item “History”.

Funding system on Binance

Due to high margins, futures prices can deviate significantly from the spot. In standard derivatives market instruments, the rate is positioned closer to the underlying coin by the time of expiration.

Perpetual contracts have no expiration time. The trader can hold them for as long as he wants.

To reduce price discordance, a mechanism of fundraising – transfer of money from one user to another – is implemented. It works like this:

1. The algorithm calculates the rate. The current value can be viewed at the top of the “Futures” page.
2. Funds are debited 3 times a day – at 0:00, 8:00 and 16:00.
3. If the futures rate is higher than the spot, fundings are positive. Funds are debited from users with long positions and transferred to participants with open shorts. If the futures quotes are lower than the spot – vice versa.

How to Calculate the Funding Rate on Binance Futures

On the exchange, periodic payments are made every 8 hours. Funding calculates the algorithm based on trader sentiment, volatility and other parameters. The values differ for cryptocurrencies. On Binance, you can see real-time data for all pairs. To do this, you need to select the “Contract Information” tab in the “Futures” section.

You can find out the current value in the futures terminal. This allows you to track the change during trading. The algorithm is as follows:

1. Authorize in the Binance profile on the website or in the application.
2. Go to the futures market terminal.
3. Select a cryptocurrency.

The value of fanding and the time until the write-off are displayed in the upper right corner. To calculate the exact amount, multiply the contract size in USDT by the rate. The marking price is used in this process. In a fast market, the quotes deviate a lot, which leads to an increase in fanding.

Technical analysis of the bet

This method of predicting quotes in the cryptocurrency market is based on historical data. Users can upload the rate change information in CSV format and pour it into any trading application. The chart is examined with the help of technical analysis tools. The most popular tactics are:

• Divergences. It is believed that in trends, the probability of continuation of movement is higher than reversal. The longer the quotes grow, the more users want to buy the coin. Therefore, when the price increases, fanding is in the minus zone. Deviations from this rule can be used in trading.
• Extreme values of the rate. The rate can be used as an indicator of the mood of participants. At market reversals, investors do not want to buy (shorting trend) or sell (longing trend). Therefore, the rate sharply changes its direction. Such moments can be tracked by the value of the funding rate.
• Elliot Wave Theory. The method is based on the behavior of market participants and can be applied to any chart. Channels and trend lines are drawn on the chart, markings are made. This allows you to predict the reversal point.

Developing a trading strategy

Traders use data on the funding rate to predict the quotes of crypto coins. The indicator changes once every 8 hours, so it is included only in long-term strategies. The deal is held for a minimum of 5-10 days. When developing a trading system, you need to take into account such factors:

• The strength of the trend. Analyzing the rate helps to track market reversals. If the coin is in a prolonged flat, there will be a lot of false signals.
• The size of the bet. Indicators differ for coins. It is profitable to trade on assets with a high value.
• The use of robots. The trader needs to analyze a lot of data. Therefore, it is better to entrust routine tasks to bots.
• Risk management system. In the crypto market, there is always a possibility of error. Therefore, it is necessary to provide conditions for exiting a position. The user should not lose more than 10% of capital per day.

How to earn on a bet in trading

When dealing with open-ended contracts, you need to keep an eye on the time of the transaction. On the Binance exchange, fanding is carried out three times a day. If the rate is less than zero and there are 15-30 minutes left before the settlement hour, you should wait for the period to close.

If the user does not have time to fix the profit before the automatic debit, the commissions will increase.

If the value is greater than zero, it is worth opening a position before the calculation. This approach will reduce commissions. The funding rate can be used in several strategies:

• Swing trading. A trader holds a position until a reversal signal appears. On average, the period ranges from several days to a year. The size of the funding rate is only one of the parameters that signal a change of trend.
• Arbitrage. Users buy an asset with positive funding on the spot and open shorts for the same volume on open-ended contracts. This allows avoiding the risk of changes in quotes. The position is held until the value of fanding goes into the minus zone.

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