Funding is a balancing mechanism on futures that every trader should know about. It involves payments between market participants themselves — when one side (long holders or short sellers) pays the other, rather than paying a commission to the exchange.

How does it work? When long positions dominate the market and funding is positive, long holders pay funds to short sellers. If most traders opened shorts and funding is negative, the situation reverses. This is not an arbitrary fee — the mechanism triggers automatically every few hours.

Why is funding needed at all? The main purpose is to prevent futures prices from diverging significantly from spot prices. When too many traders pile into one side, funding increases and starts pushing the market toward equilibrium. It's a self-regulation mechanism built into the futures structure.

What beginners need to remember: money is deducted from your account even if the price doesn't move at all. High funding indicates a skewed position — most traders have already gone one direction. And most importantly — funding is not just a commission, it's a signal of market imbalance that deserves your attention.