Step one: liquidation through the public book
When account equity drops below maintenance margin, Hyperliquid sends market orders to the order book for the full size of the position. Those orders may fill fully or partially. If enough is closed to satisfy the maintenance requirement again, any remaining collateral stays with the trader.
This is the design's best feature. Because liquidation flow goes to the public book, every participant can compete for it, and unlike centralised venues there is no clearance fee charged to the liquidated account.
Partial liquidations above 100k USDC
For liquidatable positions larger than 100,000 USDC, only 20% of the position is sent as a market liquidation order. After a block in which any of a user's positions is partially liquidated, a 30-second cooldown applies, and during that window liquidation orders for that user cover the entire position.
The effect is to reduce book impact from large forced exits, which matters to everyone trading the same asset, not just the account being liquidated.
Step two: backstop liquidation through the liquidator vault
If equity falls below two thirds of maintenance margin without a successful book liquidation, the position is taken over by the liquidator vault, a component strategy of HLP. A backstop-liquidated cross position transfers all cross positions and cross margin to the liquidator, which for a trader with no isolated positions means zero account equity. An isolated backstop liquidation transfers only that position and its isolated margin.
Critically, in backstop liquidation the maintenance margin is not returned to the user — the vault needs that buffer to make backstop liquidations profitable on average. Avoiding it is the concrete argument for stop losses or manual exits before mark price reaches the liquidation price. The profit stream from these liquidations accrues to HLP depositors rather than to a privileged market maker.
Liquidations trigger on mark price, not the book
Liquidations use the mark price, which blends external centralised-exchange prices with Hyperliquid's own book state, making the trigger robust to a single instantaneous wick. In volatile conditions or on highly leveraged positions, mark price can differ noticeably from book price — so precise monitoring requires the actual mark price formula, not the last trade.
The liquidation price shown when a position is open carries the certainty of your entry price but can still move with funding payments and, for cross positions, with unrealised PnL on your other positions.
Why liquidation risk drives basket construction
A liquidation is not a drawdown you sit through. It permanently removes the capital that would have compounded, which is why a single copied leader who blows up is not recoverable by their later good months.
Account survivability is therefore a hard floor in trader scoring rather than a weighted factor, and each mirrored leader is isolated in its own sub-account so one leader's liquidation cannot consume another's margin.
Past performance is not indicative of future results. Perpetual futures are leveraged instruments and carry a substantial risk of loss, including the loss of your entire position.
