Funding Rate refers to a periodic payment made between long and short positions in perpetual swap contracts. It serves to ensure that the price of the perpetual contract aligns closely with the underlying asset’s price.When the funding rate is positive, traders holding long positions pay a fee to those holding short positions. This typically occurs when the market is bullish, causing the perpetual contract’s price to rise above the spot price. Conversely, a negative funding rate means short positions pay longs, which usually happens in a bearish market when the contract price dips below the spot price.Funding rates are typically calculated and exchanged every few hours, depending on the exchange. They can vary significantly based on market conditions, demand, and sentiment. Understanding funding rates is crucial for traders as they can impact overall profit or loss, especially for those holding positions over extended periods. Regularly monitoring these rates helps traders adjust their strategies accordingly.