How to play HTX leverage trading? How is the funding rate calculated?

HTX, formerly Huobi, offers up to 125x leverage trading; manage positions with stop-loss/take-profit orders and monitor funding rates, applied every 8 hours.

May 16, 2025 at 10:28 pm

HTX, formerly known as Huobi, is one of the leading cryptocurrency exchanges that offers leverage trading among its many services. Leverage trading allows traders to amplify their potential profits by borrowing funds to increase their trading position. In this article, we will explore how to engage in HTX leverage trading and delve into the intricacies of the funding rate calculation.

Understanding HTX Leverage Trading

HTX leverage trading enables users to trade with borrowed funds, which can significantly increase both potential profits and potential losses. The leverage available on HTX can go up to 125x, depending on the trading pair. This means that a trader can control a position worth up to 125 times their initial margin.

To start leverage trading on HTX, you need to follow these steps:

• Log into your HTX account: Ensure you have a verified account on HTX. If you don't have one, you'll need to register and complete the necessary KYC (Know Your Customer) procedures.
• Navigate to the Futures Trading Section: Once logged in, go to the "Futures" section of the HTX platform. This is where you can access leverage trading options.
• Select a Trading Pair: Choose the cryptocurrency pair you want to trade. HTX offers a variety of pairs, including BTC/USDT, ETH/USDT, and many others.
• Choose Your Leverage: Decide on the leverage level you want to use. Remember, higher leverage increases both potential gains and risks.
• Set Your Position: Decide whether you want to go long (buy) or short (sell) on the chosen trading pair. Enter the amount you wish to trade and confirm your order.

Managing Your Leverage Trading Position

Once you have opened a leverage trading position on HTX, it's crucial to manage it effectively to mitigate risks. Here are some key aspects to consider:

• Monitoring Your Position: Keep a close eye on the market movements and your open positions. HTX provides real-time data and charts to help you make informed decisions.
• Setting Stop-Loss and Take-Profit Orders: To manage risk, you can set stop-loss and take-profit orders. A stop-loss order will automatically close your position if the price moves against you to a certain level, limiting your losses. A take-profit order will close your position when the price reaches a favorable level, securing your profits.
• Adjusting Leverage: You can adjust your leverage level at any time, depending on your risk appetite and market conditions. Be cautious when increasing leverage, as it can lead to significant losses if the market moves against you.

Understanding the Funding Rate on HTX

The funding rate is a crucial component of perpetual futures contracts, which are the type of contracts used in HTX leverage trading. The funding rate helps to align the price of the perpetual contract with the spot price of the underlying asset. It is paid periodically between traders who hold long and short positions.

The funding rate on HTX is calculated based on the difference between the perpetual contract price and the spot price of the underlying asset. If the perpetual contract price is higher than the spot price, long position holders pay the funding rate to short position holders. Conversely, if the perpetual contract price is lower than the spot price, short position holders pay the funding rate to long position holders.

How is the Funding Rate Calculated on HTX?

The funding rate on HTX is calculated using the following formula:

[ \text{Funding Rate} = \text{Premium Index} + \text{Clamp}(\text{Interest Rate} - \text{Premium Index}, 0.05\%, -0.05\%) ]

Here's a breakdown of the components:

• Premium Index: This is the difference between the perpetual contract price and the spot price, averaged over a certain period. It reflects the market's perception of the future price movement.
• Interest Rate: This is a fixed rate set by HTX, which represents the cost of capital. It is typically a small percentage, such as 0.03% per 8-hour period.
• Clamp Function: This function limits the impact of the interest rate on the funding rate. It ensures that the funding rate does not deviate too far from the premium index.

The funding rate is typically calculated and applied every 8 hours. If the funding rate is positive, long position holders pay short position holders. If it is negative, short position holders pay long position holders.

Practical Example of Funding Rate Calculation

Let's consider a practical example to illustrate how the funding rate is calculated on HTX. Suppose the premium index is 0.02%, and the interest rate is 0.03%. Using the formula above:

[ \text{Funding Rate} = 0.02\% + \text{Clamp}(0.03\% - 0.02\%, 0.05\%, -0.05\%) ]

[ \text{Funding Rate} = 0.02\% + \text{Clamp}(0.01\%, 0.05\%, -0.05\%) ]

Since 0.01% falls within the clamp range, the funding rate is:

[ \text{Funding Rate} = 0.02\% + 0.01\% = 0.03\% ]

In this example, if you hold a long position, you would pay a funding rate of 0.03% to short position holders every 8 hours.

Managing Funding Rate Payments

Understanding and managing funding rate payments is essential for successful leverage trading on HTX. Here are some strategies to consider:

• Monitor the Funding Rate: Keep an eye on the current funding rate and its historical trends. High funding rates can indicate a market that is overly bullish, while low funding rates can indicate a bearish market.
• Adjust Your Position: If the funding rate is high and you hold a long position, you might consider reducing your position size or switching to a short position to avoid paying high funding fees.
• Use Hedging Strategies: You can use hedging strategies to offset the impact of funding rate payments. For example, you could open a small short position to balance out the funding rate payments on your long position.

Frequently Asked Questions

Q: Can I change my leverage level after opening a position on HTX?

A: Yes, you can adjust your leverage level at any time on HTX. To do this, go to the "Futures" section, find your open position, and use the leverage adjustment tool to change the leverage level. Be aware that changing leverage can affect your position's liquidation price.

Q: How often is the funding rate applied on HTX?

A: The funding rate on HTX is applied every 8 hours. The exact times are typically 00:00 UTC, 08:00 UTC, and 16:00 UTC.

Q: What happens if I don't have enough funds to pay the funding rate on HTX?

A: If you do not have sufficient funds in your account to cover the funding rate payment, your position may be liquidated to cover the shortfall. It's important to maintain adequate margin in your account to avoid forced liquidation.

Q: Can I trade leverage on HTX without paying funding rates?

A: No, funding rates are an integral part of perpetual futures contracts on HTX. However, you can manage your exposure to funding rates by adjusting your positions and using hedging strategies.