> ## Documentation Index
> Fetch the complete documentation index at: https://docs.liquid.trade/llms.txt
> Use this file to discover all available pages before exploring further.

# Funding rates

> How funding keeps perp prices close to the underlying asset, and how it affects your position on Liquid.

[Perpetual futures](https://docs.liquid.trade/about-liquid/what-are-perpetual-futures.md) never expire, so they need another way to stay close to the price of the underlying asset. That's funding: a regular payment between traders who are long and traders who are short.

## How funding works

* **Positive funding:** longs pay shorts. This happens when the perp trades above the underlying price.
* **Negative funding:** shorts pay longs. This happens when the perp trades below it.

The payment pushes traders toward the side that brings the perp back in line with the asset. Funding goes straight between traders: it isn't a fee, and Liquid doesn't take a cut.

Funding is paid **every hour**. It's added to or taken from your balance, so it also moves your [liquidation price](https://docs.liquid.trade/trading/liquidations.md#your-liquidation-price).

## See the current rate

The current funding rate and a countdown to the next payment are shown in the market stats on the trading screen. On iOS, you can also open **Settings** → **Funding Rates**.

## How much you pay or receive

$$
\text{Funding payment} = \text{Position size} \times \text{Oracle price} \times \text{Funding rate}
$$

The oracle price is a weighted median of prices from major spot exchanges, not the mark price.

**Example:** You're long 1 BTC, the oracle price is \$100,000, and the hourly funding rate is 0.01%. You pay \$10 for that hour. If you were short, you'd receive \$10.

## How the rate is set

The rate has two parts:

* **Interest:** fixed at 0.01% every 8 hours (0.00125% an hour), paid by longs to shorts.
* **Premium:** how far the perp is trading above or below the oracle price, measured with realistic order sizes and sampled every 5 seconds over the hour.

$$
\text{Funding rate} = \text{Premium} + \text{clamp}(\text{Interest} - \text{Premium}, -0.05\%, 0.05\%)
$$

The formula gives an 8-hour rate; each hour you pay or receive one-eighth of it. Funding is capped at 4% per hour. Stock, commodity, and other builder-deployed perps can use a different premium formula set by the market's deployer.

> [!TIP]
>
> Funding adds up on positions you hold for days. Check the rate before you hold a position overnight, especially when it's high on your side.


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