Decay is applied on open positions every 8 hours as counted from the time they are opened.
Decay is an amount that is subtracted from your active P/L and added to the liquidity pool. It can be seen as a payment made today to subsidize potential profit in the future. It's not a fee paid to Trade8.
Legacy margin trading platforms call it 'funding', 'overnight premium', or 'swap'. The difference is that decay on Trade8 is not applied at a set time for all positions (for example, 12 GMT).
It's applied after 8 hours on each individual position, which is more predictable and advantageous to traders, because it gives ample time for a position to develop without incurring any charges whatsoever.
If you open a 10 BTC position on a market with a decay rate of 0.003%, every 8 hours the decay charge is:
0.003% * 10 = 0.0003 BTC
- if you keep the position open for less than 8 hours, no decay is applied.
- if you close the position within 8-16 hours, 0.0003 BTC decay is applied.
- if you close the position within 16-24 hours, 0.0006 BTC decay is applied.
The decay rate for a market can be found in the Market Info panel in your dashboard.
The profit and loss numbers displayed in your dashboard already take into account any decay that may have applied to your position.
All open positions incur decay – even positions opened at 1x leverage.
Decay applies as long as you hold your position open, regardless of whether the market is open or closed.
How decay rates are determined
The decay rate for a given market is set without intervention from Trade8, in line with our guiding principle of transparency. The Daily Decay Rate (three times the decay rate) is recalculated every hour and set for each market according to the following formula:
Daily Decay Rate = 2 % * ATR(D, 4)
ATR is the market's Average True Range. The daily decay rate for a market at a given time is equal to 2% of the 1-day, 4-period ATR.
So, the decay rate is proportional to a market's daily volatility.
In practice, this means that the decay rate for a market will increase as volatility increases and decreases as volatility decreases.
Note: The decay rate tied to an open position may vary based on the changes in the overall market decay rate.