> For the complete documentation index, see [llms.txt](https://docs.paragon.trade/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.paragon.trade/trading/liquidations.md).

# 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

1. **Trigger** - Position margin drops below maintenance margin requirement
2. **Partial liquidation** - Engine attempts to liquidate \~20% of the position first
3. **Full liquidation** - If partial fails to restore margin, full position closes at market price
4. **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.

→ [Hyperliquid Liquidations](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/liquidations)

## 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

| Strategy                 | How it helps                                                                                                    |
| ------------------------ | --------------------------------------------------------------------------------------------------------------- |
| **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.

→ [Hyperliquid ADL Documentation](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/liquidations)


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