Margin supports the position, funding changes account equity over time and liquidation begins when the account falls below the venue\u2019s maintenance requirement.<\/p>\n
Liquidation price, margin and funding often appear as separate fields. They describe one connected system.<\/p>\n
Margin is the collateral supporting a leveraged position. Funding transfers value between long and short holders over time. Liquidation begins when account equity falls below the venue\u2019s maintenance requirement, usually based on a mark price rather than the last\u00a0trade.<\/p>\n
Reading only the liquidation number misses how it can\u00a0change.<\/p>\n
A perpetual-futures position represents market exposure larger than the collateral assigned to\u00a0it.<\/p>\n
The initial margin lets the position open. Maintenance margin is the minimum equity the venue requires to keep it open. The gap between current equity and maintenance margin is the position\u2019s buffer.<\/p>\n
Leverage changes that buffer. Higher leverage generally means less initial collateral relative to position size, leaving less room for an adverse\u00a0move.<\/p>\n
The margin mode determines which collateral is available.<\/p>\n
Isolated margin<\/strong> assigns collateral to one position. The loss is contained to that position\u2019s allocated collateral under the venue\u2019s\u00a0rules.<\/p>\n Cross margin<\/strong> allows eligible positions to share an account-level collateral pool. Profit, loss and margin use in one cross position can affect the room available to\u00a0others.<\/p>\n Funding is a periodic payment between long and short\u00a0holders.<\/p>\n When funding is positive, longs pay shorts. When it is negative, shorts pay longs. On Hyperliquid, funding is paid\u00a0hourly.<\/p>\n The position size does not need to change for the account balance to change. A trader who pays funding loses some account equity. A trader who receives it gains some, before fees and price movement.<\/p>\n Over one interval the amount may look small. Across a large position or many intervals, the cumulative effect can become meaningful.<\/p>\n This is one reason a displayed liquidation price can move while the market price barely\u00a0changes.<\/p>\n Liquidation is triggered when the account no longer meets the venue\u2019s maintenance-margin requirement.<\/p>\n Hyperliquid documents the condition as account equity falling below maintenance margin. It uses mark price in the calculation. This reduces the chance that one isolated trade triggers liquidation, but it does not remove liquidation risk.<\/p>\n For an isolated position, the relevant equity is tied to that position\u2019s assigned collateral and unrealized profit or\u00a0loss.<\/p>\n For cross margin, the calculation uses the cross account\u2019s equity and maintenance requirements across eligible positions. A second position, a withdrawal or accumulated funding can therefore change the liquidation context for the first position.<\/p>\n Consider an illustrative isolated long position:<\/p>\n position notional: $10,000initial margin allocated: $2,000leverage at entry:\u00a05xfunding paid over several intervals: $20<\/p>\n Assume no margin is added and ignore trading fees for simplicity.<\/p>\n The funding payment reduces the position\u2019s supporting equity from $2,000 to $1,980 before considering price movement. The position size remains\u00a0$10,000.<\/p>\n If the mark price then moves against the position, unrealized loss reduces that equity further. Liquidation occurs when the remaining equity reaches the venue\u2019s maintenance threshold, not when the full $2,000 has necessarily disappeared.<\/p>\n This example is deliberately simplified. Real liquidation prices depend on the venue\u2019s maintenance tiers, entry price, mark price, position size, fees, funding and margin\u00a0mode.<\/p>\n The number may move\u00a0when:<\/p>\n margin is added or\u00a0removedfunding is paid or\u00a0receivedthe position size\u00a0changesanother cross-margin position gains or loses\u00a0valuethe venue\u2019s maintenance tier changes with position\u00a0sizethe mark-price relationship changes<\/p>\n Treat the displayed liquidation price as a current calculation, not a permanent property of the\u00a0trade.<\/p>\n Is the position cross or isolated? How much collateral is supporting it?<\/p>\n Who is paying whom, how often, and how much has the position paid or received so\u00a0far?<\/p>\n Which price controls the calculation, and how far is that price from the current liquidation estimate?<\/p>\n Then check the rest of the account. A cross-margin liquidation estimate without the other positions is incomplete.<\/p>\n Margin, funding and liquidation are not three independent warnings.<\/p>\n Margin defines the buffer. Funding can add to or subtract from that buffer. Price movement changes unrealized profit and loss. The venue compares the resulting equity with its maintenance requirement using the mark\u00a0price.<\/p>\n Understanding that chain is more useful than memorizing one liquidation number.<\/p>\n Open one perpetual market and identify margin mode, funding and liquidation context<\/strong><\/a><\/p>\n Hyperliquid Docs: margining<\/a>Hyperliquid Docs:\u00a0funding<\/a>Hyperliquid Docs: liquidations<\/a>Hyperliquid Docs: contract specifications<\/a><\/p>\n Educational mechanics only. Not financial advice. The worked example is illustrative and omits venue-specific details.<\/em><\/p>\n Liquidation Price, Margin and Funding: How the Three Fit Together<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":" Margin supports the position, funding changes account equity over time and liquidation begins when the account falls below the venue\u2019s maintenance requirement. Liquidation price, margin and funding often appear as separate fields. They describe one connected system. Margin is the collateral supporting a leveraged position. Funding transfers value between long and short holders over time. […]<\/p>\n","protected":false},"author":0,"featured_media":247539,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-247538","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/247538"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=247538"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/247538\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/media\/247539"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=247538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=247538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=247538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Funding changes equity without changing position\u00a0size<\/h3>\n
Liquidation uses maintenance margin and mark\u00a0price<\/h3>\n
A worked\u00a0example<\/h3>\n
Why the displayed liquidation price can\u00a0change<\/h3>\n
Read the three fields in this\u00a0order<\/h3>\n
1. Margin mode and collateral<\/h3>\n
2. Current and cumulative funding<\/h3>\n
3. Mark price and liquidation distance<\/h3>\n
The relationship is the\u00a0point<\/h3>\n
Sources<\/h3>\n