This is where Auto Deleveraging (ADL) comes in.
ADL is the safety valve of the Hyperliquid perpetual futures engine. It ensures that no trader ever goes into a negative balance, protecting the health of the entire exchange. However, for the traders on the receiving end of an ADL event, the experience is brutal: your position is forcibly closed, and you lose your remaining margin.
If you trade leveraged positions on Hyperliquid, understanding ADL is as critical as understanding your liquidation price. This guide breaks down exactly how Hyperliquid's ADL system works, how the ADL score is calculated, and the specific mechanics that determine if your position will be used to absorb a liquidation.
About this guide: I'm Lawrence, the writer behind supa.is. Between February and May 2026 I've published 150+ articles on supa.is across crypto and brokerage tooling — including 30+ Hyperliquid-specific guides (recent examples: Hyperliquid Liquidation Price & Maintenance Margin, Hyperliquid Cross vs Isolated Margin Guide, Hyperliquid Account Value & Unrealized PnL Explained). The most-repeated reader question across that Hyperliquid archive is exactly how auto deleveraging works, which is why I'm publishing this standardized guide instead of answering one-off.
What Is Auto Deleveraging (ADL)?
Auto Deleveraging is a mechanism used by perpetual futures exchanges to prevent a trader's account from going into a negative balance.
When a trader's position is liquidated, the exchange attempts to close the position by selling it to the market. If the market is moving too fast, or if there are no buyers/sellers, the liquidation engine might not be able to close the entire position. The trader's margin is already zero, meaning there is no money left to absorb the loss.
To prevent this trader from having a negative balance (which would require the exchange to cover the loss), the Hyperliquid engine initiates an ADL event. It forcibly closes a portion of the opposing profitable position from another trader to absorb the loss.
In simple terms: The most profitable trader on the opposite side of your losing position gets their position forcibly closed to save you from going negative.
The Hyperliquid Liquidation Flow
To understand ADL, you first need to understand the liquidation flow on Hyperliquid. The engine processes liquidations in three distinct phases. ADL only kicks in as the absolute last resort.
Phase 1: Liquidation Engine (Market Orders)
When a trader's margin falls below the maintenance margin requirement, the liquidation engine triggers. It attempts to close the position by placing a market order in the opposite direction. If the order book has enough depth, the position is closed, and the liquidation is complete.Phase 2: Liquidation Engine (Limit Orders)
If the market order cannot fully close the position because the order book is too thin, the engine switches to placing limit orders on the best available price. It waits for the market to absorb the remaining position.Phase 3: Auto Deleveraging (ADL)
If the limit orders also fail to close the position, the liquidation engine fails to fully liquidate the trader. The trader's account is still at risk of going negative. At this point, the Hyperliquid engine initiates ADL.It scans the order book for profitable positions on the opposite side of the failed liquidation. It selects the position with the highest ADL score and forcibly closes a portion of it. The margin from the profitable position is used to cover the loss of the liquidated position. This process repeats until the liquidated position is fully closed or no more profitable positions are available.
How the ADL Score Is Calculated
Not all profitable traders are at equal risk of being ADL'd. Hyperliquid uses a mathematical formula to calculate the ADL score for every open position. The higher the ADL score, the more likely your position will be selected for auto deleveraging.
The ADL score is calculated as follows (Hyperliquid fees and mechanics):
ADL Score = (Margin) / (Unrealized PnL)Where:
* Margin is the total margin allocated to the position. * Unrealized PnL is the current profit of the position.A high ADL score means you have a lot of margin relative to your profit. In other words, you are using very low leverage, or your position has barely moved in your favor.
Conversely, a low ADL score means you have very little margin relative to your profit. This indicates you are using high leverage and your position is deeply in profit.
Why does the engine target high-leverage (low ADL score) positions?Because the goal of ADL is to absorb the loss of the liquidated position. If the engine takes a highly leveraged position (low margin, high PnL), the profit alone is more than enough to absorb the loss. The engine can close a small fraction of that position and use the unrealized profit to cover the liquidation.
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Start Trading on Hyperliquid →Targeting high-leverage, highly profitable positions is more efficient for the engine because it minimizes the disruption to the market and ensures the loss is absorbed quickly.
A Practical Example of Hyperliquid ADL
Let's walk through a concrete scenario to see how ADL plays out on Hyperliquid.
The Setup: * Trader A is long 100 BTC at $50,000. They are using 10x leverage. Their margin is $500,000. * Trader B is short 100 BTC at $50,000. They are using 2x leverage. Their margin is $2,500,000. The Crash: The price of BTC crashes to $45,000. The Liquidation: Trader A's margin is wiped out. The liquidation engine attempts to close Trader A's long position by selling BTC into the market. However, the market is in a panic, and there are no buyers. The engine fails to close Trader A's position. The ADL Event: The engine initiates ADL. It looks for profitable short positions. Trader B is short and deeply in profit.Let's calculate the ADL scores:
* Trader A is being liquidated (long side). * Trader B is short. Their Unrealized PnL is 100 BTC × ($50,000 - $45,000) = $500,000. * Trader B's ADL Score = Margin / Unrealized PnL = $2,500,000 / $500,000 = 5.0.Because Trader B has the highest ADL score among profitable shorts, the engine targets them. It forcibly closes a portion of Trader B's short position. Let's say it closes 20 BTC of Trader B's position. The unrealized profit on those 20 BTC ($100,000) is used to cover Trader A's loss.
Trader B is now short 80 BTC instead of 100 BTC. Their position has been forcibly reduced without their consent, and they lose the profit on the closed portion.
How to Avoid Getting ADL'd on Hyperliquid
Getting ADL'd is incredibly frustrating. You are in a winning position, you are managing your risk, and suddenly the exchange forcibly closes your trade. While you cannot completely eliminate the risk of ADL, you can significantly reduce your exposure by understanding the mechanics.
1. Use Higher Leverage (Lower ADL Score)
As we established, the ADL score is Margin / Unrealized PnL. If you trade with higher leverage, your margin is lower relative to your position size, which lowers your ADL score.If you are trading with 1x leverage (spot-like exposure), your ADL score will be very high, making you a prime target for ADL. If you are trading with 50x leverage, your ADL score will be very low, making you highly unlikely to be selected.
Note: This doesn't mean you should use excessive leverage just to avoid ADL. High leverage increases your risk of liquidation. But if you are holding a large, profitable position, using moderate leverage (e.g., 5x-10x instead of 1x-2x) will lower your ADL score and protect you from being ADL'd.2. Keep Your Margin Low
If you have a large amount of margin sitting in your position, you are increasing your ADL score. If you are holding a large margin reserve in your Hyperliquid account, consider moving it off the exchange or into a spot position. The less margin you have allocated to your leveraged position, the lower your ADL score.3. Avoid Holding Profitable Positions During Extreme Volatility
ADL only occurs when the liquidation engine fails to close a position. This typically happens during extreme volatility, flash crashes, or when liquidity dries up. If you are holding a highly profitable position and the market is moving violently, your risk of being ADL'd is at its highest. Consider taking partial profits or tightening your stop-loss during these events.4. Understand Your Exposure
If you are trading on Hyperliquid, you should be aware of the ADL score of your positions. While the platform doesn't explicitly display your ADL score, you can calculate it yourself. If your score is high, you are sitting on a ticking time bomb during a market crash.ADL vs. Liquidation: What's the Difference?
New traders often confuse ADL with liquidation. They are related, but they are fundamentally different.
* Liquidation is the process of forcibly closing a losing position because the trader's margin has fallen below the maintenance margin requirement. The trader loses their margin.
* ADL is the process of forcibly closing a *profitable* position to absorb the loss of a liquidated position. The trader loses their margin allocated to the closed portion of the position.In a liquidation, the trader is on the losing side of the market. In an ADL event, the trader is on the winning side of the market, but they are penalized to prevent the exchange from taking a loss.
Is ADL Fair?
From a mathematical and systemic perspective, ADL is necessary. Without it, exchanges would have to cover the losses of insolvent traders, which would drain the exchange's insurance fund and potentially lead to the exchange shutting down. ADL ensures that the risk is distributed among the traders who are currently profitable, rather than being absorbed by the exchange.
However, from a trader's perspective, it feels incredibly unfair. You are making a profit, you are managing your risk, and the exchange forcibly closes your position because someone else lost money.
It's important to remember that ADL is a last resort. Hyperliquid's liquidation engine is highly efficient, and it only resorts to ADL when the market is completely broken. If you are getting ADL'd, it means the market was in a state of extreme distress.
FAQ
Can I avoid ADL entirely on Hyperliquid?
No. As long as you are trading leveraged positions on Hyperliquid, you are subject to the ADL mechanism. However, you can significantly reduce your risk by using higher leverage (which lowers your ADL score) and avoiding holding large, highly profitable positions during extreme market volatility.Does ADL apply to spot trading on Hyperliquid?
No. ADL only applies to leveraged perpetual futures positions. Spot trading on Hyperliquid does not use leverage, so there is no risk of liquidation or auto deleveraging.How much of my position gets closed during an ADL event?
It depends on the size of the loss that needs to be absorbed. The Hyperliquid engine will only close as much of your position as is necessary to cover the liquidated trader's loss. You might lose 10% of your position, or you might lose 100% of your position, depending on the severity of the liquidation.Is there a fee for being ADL'd?
No. Hyperliquid does not charge a penalty fee for being ADL'd. The only loss you incur is the margin allocated to the portion of your position that is forcibly closed, along with the unrealized profit on that closed portion.Can I appeal an ADL event?
No. ADL is an automated, mathematical process. There is no human discretion involved, and there is no appeal process. If your position is selected for ADL, it is closed immediately.Risk Warning
Risk Warning: Crypto trading involves substantial risk of loss. Never invest more than you can afford to lose. This is not financial advice.
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