Margin Management

Margin management in Hyperliquid L1 ensures traders can efficiently use their capital while maintaining robust risk controls. Traders can choose between two margin modes—Cross and Isolated—depending on their risk appetite and trading strategy.

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Margin Modes ⚖️

Cross Margin 🌐

• Shared Collateral: Positions in cross margin mode share a single collateral pool, maximizing capital efficiency.

• Dynamic Margin Allocation: Unrealized profits (PnL) from winning trades are automatically added as margin for new or existing positions.

• Risk Distribution: While efficient, losses on one position may impact the entire portfolio, as all positions draw from the same collateral.

Isolated Margin 🔒

• Dedicated Collateral: Each position has its own dedicated collateral, isolating its risk from other trades.

• Flexible Margin Adjustments: Traders can add or remove margin for individual positions after opening.

• Granular Risk Management: Losses on one position do not affect others, providing better control over liquidation risks.

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Initial Margin and Leverage 🚀

Leverage Options

• Traders select leverage from 1x to a maximum that varies by asset (ranging from ~3x to 50x).

• Higher leverage reduces the initial margin required but increases the risk of liquidation.

Initial Margin Requirements

• The formula for initial margin is: Initial Margin = (Position Size × Mark Price) ÷ Leverage

• For cross margin, the initial margin is locked and cannot be withdrawn.

• For isolated margin, traders can adjust the margin after opening the position.

Leverage Adjustments

• Leverage is only checked when opening a position.

• After opening, traders must actively monitor risk. Actions to manage leverage include:

  • Partially or fully closing positions

  • Adding margin (isolated positions)

  • Depositing USDC (cross positions)

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Maintenance Margin 🛡️

Definition:

Maintenance margin ensures traders maintain enough collateral to avoid liquidation.

• At max leverage, maintenance margin is set to half of the initial margin.

  • Example: At 20x leverage, maintenance margin is 2.5% of the notional position.

Liquidation Triggers:

• Cross Margin: Liquidation occurs when the account equity (including unrealized PnL) falls below the required maintenance margin for all positions.

• Isolated Margin: Liquidation is triggered independently for each position, based solely on its own margin and notional value.

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Hyperliquid’s margining system is inspired by centralized exchanges, offering traders a familiar yet fully decentralized experience. Balancing efficiency and risk, it empowers users to optimize their trading strategies while safeguarding their capital.