Question 1

What is a liquidation price?

Accepted Answer

A liquidation price is the price level at which your margin balance falls below the maintenance margin requirement, triggering the automatic closure of your position. When trading with leverage, if the market moves against your position significantly, your losses can approach or exceed your initial margin. The liquidation price is calculated to ensure the exchange can close your position before your losses exceed your collateral.

Question 2

How is liquidation price calculated on Hyperliquid?

Accepted Answer

On Hyperliquid, the liquidation price is calculated based on your entry price, position size, leverage, and the maintenance margin rate. For long positions, liquidation occurs when the price drops enough that your unrealized loss equals your initial margin minus the maintenance margin. For short positions, it's when the price rises to that threshold. The formula accounts for the maintenance margin requirement (typically 0.5% for most assets) to ensure positions are closed before they go into negative equity.

Question 3

What is the maintenance margin on Hyperliquid?

Accepted Answer

The maintenance margin on Hyperliquid is typically 0.5% for most perpetual contracts. This is the minimum amount of margin you must maintain in your account relative to your position size. If your margin falls below this level, your position will be liquidated. Different assets may have different maintenance margin requirements based on their volatility and liquidity.

Question 4

How can I avoid liquidation?

Accepted Answer

To avoid liquidation: 1) Use lower leverage - this gives your position more room to move against you. 2) Set stop-losses before your liquidation price. 3) Monitor your positions regularly. 4) Add more margin to your position if it's moving against you. 5) Reduce your position size if the market becomes volatile. 6) Never risk more than you can afford to lose.

Question 5

What's the difference between isolated and cross margin?

Accepted Answer

Hyperliquid uses cross-margin by default, meaning all your account balance serves as collateral for all open positions. This provides more flexibility but also means losses in one position can affect your other positions. Understanding this is crucial for risk management, as a large loss in one position could potentially liquidate multiple positions if it depletes your account margin.

Question 6

What happens when I get liquidated?

Accepted Answer

When your position reaches the liquidation price, Hyperliquid's liquidation engine automatically closes your position. The remaining margin after covering the loss goes to the insurance fund if there's any left, or the insurance fund covers any shortfall. You lose your initial margin for that position. There's no additional penalty beyond losing your margin, but the loss can be significant when using high leverage.

Question 7

Why is my actual liquidation price different from the calculator?

Accepted Answer

Several factors can cause differences: 1) Funding rates - accumulated positive or negative funding affects your margin. 2) Unrealized PnL from other positions in cross-margin mode. 3) Partial close or position adjustments. 4) Different maintenance margin rates for specific assets. 5) Rounding in the exchange's calculations. This calculator provides an estimate - always verify with the actual liquidation price shown in your trading interface.

Question 8

What leverage should I use?

Accepted Answer

There's no one-size-fits-all answer, but generally: beginners should use 2-5x leverage maximum. Even experienced traders rarely exceed 10x for swing trades. Higher leverage (20x+) is extremely risky and should only be used for very short-term trades with tight stop-losses. Remember: higher leverage means higher potential returns but also higher risk of liquidation. A 50x leveraged position only needs a 2% move against you to be liquidated.

Perpetuals Liquidation Calculator

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Short Position Example

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