Risk & Liquidations
When a position's margin falls below maintenance requirements, Hyperliquid's liquidation engine closes it automatically. Understanding this process helps you manage risk effectively.
Quick summary: Maintain margin above maintenance requirements. Use stop losses. Monitor leverage. Liquidation prices are visible on every position.
How Liquidations Work
Trigger - Position margin drops below maintenance margin requirement
Partial liquidation - Engine attempts to liquidate ~20% of the position first
Full liquidation - If partial fails to restore margin, full position closes at market price
Settlement - Remaining collateral (if any) returns to your account
If liquidation results in negative equity, the insurance fund covers the shortfall. If the insurance fund is depleted, Auto-Deleveraging (ADL) may reduce profitable positions on the other side.
Liquidation Price
Your liquidation price is calculated from:
Entry price and position size
Leverage used
Maintenance margin requirement (varies by position size)
The Hyperliquid interface displays your estimated liquidation price for each open position in real time.
Avoiding Liquidation
Monitor margin ratio
Keep well above maintenance threshold; set alerts if available
Use stop losses
Exit positions automatically before reaching liquidation price
Manage leverage
Lower leverage = wider buffer to liquidation price
Add margin
In cross margin mode, additional deposits to your Hyperliquid account automatically increase your margin buffer
Auto-Deleveraging (ADL)
ADL is a last-resort mechanism. When liquidations cannot be filled and the insurance fund is exhausted, ADL automatically reduces opposing positions starting with the highest-profit, highest-leverage traders. This ensures the system remains solvent.
Backstop Liquidator
Paragon markets are covered by an onchain backstop liquidator designated by the Hyperliquid protocol. Where a position has fallen below maintenance margin and cannot be cleared through the order book, the backstop assumes that position directly and manages the unwind.
Because the handoff happens before deleveraging is considered, a position the backstop absorbs never reaches profitable traders on the opposite side. Markets it covers are correspondingly less exposed to ADL when books thin out, and less bad debt accumulates when liquidations fill poorly.
The backstop does not replace ADL. ADL remains the final step, applied only where liquidations and the backstop together cannot restore solvency.
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