How liquidation works on Hyperliquid, and how to stay away from it

The condition

You are liquidated when your account value, including unrealised profit and loss, falls below the maintenance margin required by your open positions.

Maintenance margin is defined as half the initial margin requirement at the market’s maximum leverage. That gives the following relationship, which is worth committing to memory because it explains most liquidations:

Market’s max leverage	Maintenance margin	Roughly how far price can move against you
40x	1.25% of notional	a little over 1%
25x	2% of notional	about 2%
20x	2.5% of notional	about 2.5%
10x	5% of notional	about 5%
3x	around 16.7% of notional	about 17%

The right-hand column is the honest reason to care. On the highest-leverage markets, the distance between a working position and no position is inside a normal hour.

The formula

The documentation gives the liquidation price as:

liq_price = price - side * margin_available / position_size / (1 - l * side)

where  l    = 1 / maintenance_leverage
       side = 1 for a long, -1 for a short
       margin_available (cross)    = account_value - maintenance_margin_required
       margin_available (isolated) = isolated_margin - maintenance_margin_required

Two things fall out of this that surprise people.

In cross margin, margin_available is your whole account. A profitable position elsewhere pushes this liquidation price further away, and a losing one pulls it closer. Your positions are linked whether you think of them that way or not.

In isolated margin, only that position’s own margin counts. The liquidation price is fixed by what you allocated, and nothing else in your account can rescue it or be dragged down by it.

Our liquidation calculator runs this for your own numbers rather than making you do it by hand.

What happens when you get there

The sequence is more considered than “position deleted”, and the details affect how much you lose.

First, the book. The engine attempts to close the position by sending market orders to the order book. In a liquid market this is usually the end of it, and the fill is near the liquidation price.

Above $100,000, in slices. For a liquidatable position larger than that, only 20% is sent as a market liquidation order, then a thirty-second cooldown follows. This exists so that one large position does not crater the book, and it sometimes means the market recovers and the rest of the position survives.

If equity keeps falling, the backstop. Below roughly two thirds of the maintenance margin, the position transfers to the liquidator vault instead. Cross positions transfer as a whole; isolated positions transfer separately. In this case the maintenance margin is not returned to you.

That last clause is the real cost of a liquidation here. There is no clearance fee, which is a genuine advantage over venues that charge a penalty, but a backstop liquidation keeps the maintenance margin.

The liquidator vault is other traders

The counterparty absorbing backstop liquidations is HLP, the protocol’s liquidity vault, funded by depositors. This is worth knowing for two reasons.

It means liquidations are absorbed by a transparent, on-chain pool whose performance anyone can inspect, rather than by an insurance fund whose balance you learn about after a crisis.

And it means that if you deposit into HLP, you are on the other side of these events. That is where a large part of its return comes from, and also where its drawdowns come from.

Staying away from it

Size from the liquidation price, not from the leverage slider. Decide what price would prove you wrong, put your stop there, and choose a size such that the liquidation price sits well beyond it. If the liquidation price is closer than your stop, the position is too large.

Use isolated margin while you are learning. It caps the damage to one position and makes the arithmetic simple.

Watch funding on a held position. Funding is charged hourly and drains collateral, which moves your liquidation price closer over time even if the price has not moved.

Add margin rather than averaging down. Adding to a losing position increases notional and moves the liquidation price toward you. Adding margin moves it away. They feel similar and do opposite things.

Remember the margin tiers. Increasing a position can push you into a tier with a lower maximum leverage and therefore a higher maintenance requirement, moving your liquidation price closer for reasons unrelated to price.