What funding is, who pays whom, how much it costs at leverage, and why extreme funding is a warning sign rather than a bonus.
A perpetual future has no expiry, so the exchange needs a mechanism to keep its price near the spot price. That mechanism is funding: a periodic payment, usually every eight hours, between long and short positions. When the perp trades above spot, longs pay shorts. When it trades below, shorts pay longs. The exchange does not keep the money; it moves between traders.
Funding is charged on the position size, not on your margin. A rate of 0.05% per eight hours sounds trivial. On a 20x position it is 1% of your margin per payment, three times a day. Hold through a weekend at 0.1% and you have paid roughly 6% of your margin for the privilege of being on the crowded side. You can be right about direction and still lose to rent.
When funding spikes, the crowd is leaning one way. That is precisely when squeezes happen: the crowded side is paying to hold, the price stalls, and the first stop cascade sends everyone through the exit together. Very high positive funding is not a reason to be long; it is a reason to be small or to be patient.
Make the current funding rate part of your pre-trade routine. If it is extreme in your direction, you are late to a crowded trade. Either sit out or reduce size and holding time. Simulators that ignore funding are fine for learning entries and stops, but remember that the real bill arrives every eight hours.