The following explains common basic terminology in futures trading to help you better understand page data and risk mechanisms.
1. Mark Price
The Mark Price is the reference price used by the system to calculate Profits & Losses (PnL) and liquidations.
Deep Logic: It is an "index price" calculated in real-time by aggregating spot prices from multiple major exchanges through Hyperliquid's proprietary high-performance oracle system.
Practical Effect: It ensures price fairness in the on-chain environment. Since Hyperliquid is decentralized, the Mark Price effectively prevents irrational liquidations caused by malicious large orders (fat-finger errors) instantly altering the market price.
2. Last Price
The Last Price is the price of the most recent trade in the market.
Deep Logic: It reflects the most real-time outcome of the battle between buyers and sellers on the current order book and changes very rapidly.
Practical Effect: Although it does not determine liquidation, it is often used as the trigger condition for Take Profit/Stop Loss (TP/SL). During periods of intense volatility, the Last Price may show a noticeable deviation from the Mark Price.
3. Entry Price
This is the initial cost basis when you enter the market.
Deep Logic: If you enter the market multiple times at different price levels (scaling in), the system will automatically calculate the weighted average of these prices to determine your final average entry price.
Practical Effect: It serves as the benchmark for determining whether your current position is profitable or at a loss.
4. Liquidation Price
The Liquidation Price is the "life or death line" for your position.
Deep Logic: Liquidation fundamentally occurs when your Account Equity falls below the Maintenance Margin.
Maintenance Margin: This is the minimum capital ratio the system requires you to hold, usually half of the Initial Margin corresponding to the maximum leverage selected (e.g., if an asset supports 40x leverage, the maintenance margin rate is approximately 1.25%).
Critical Point: When the Mark Price fluctuates such that your Account Equity drops below this threshold, the liquidation process is automatically triggered.
Liquidation Process (Two Steps):
Order Book Liquidation (Priority): The system will first attempt to send your position to the public order book as a market order. If the trade is executed successfully and there are remaining funds after deducting losses, the remaining margin is returned to you. This is more user-friendly than many CEXs which impose high penalty fees.
Vault Takeover (Secondary): If market volatility is extreme, and the equity drops below 2/3 of the Maintenance Margin, and the order book cannot absorb the position, the HLP (Liquidator Vault) will directly take over the position. In this scenario, the remaining Maintenance Margin is retained by the Vault as a risk compensation.
Dynamic Nature: The Liquidation Price is constantly adjusted based on your Unrealized PnL and the real-time received funding fees. Maintaining a healthy "Margin Fraction" is more important than solely focusing on the Liquidation Price.
📖 Official Reference: For detailed algorithms on the liquidation mechanism, the Maintenance Margin ratio table, and the role of HLP, you can consult the official documentation: Hyperliquid Docs - Liquidations
5. Funding Rate
The Funding Rate is a periodic fee mechanism between Long and Short parties in perpetual contracts, used to keep the contract price aligned with the spot price.
Payment Rule: If positive, Longs pay Shorts; if negative, Shorts pay Longs.
HL Feature: Unlike the traditional 8-hour settlement, Hyperliquid adopts real-time, continuous settlement. Fees are calculated instantly and proportionally based on your holding time, eliminating the concept of a fixed "settlement moment."
6. Liquidation
When the losses in your position cause the remaining margin to be insufficient to support the position, the system will automatically close the position.
Trigger Logic: This is a protective mechanism designed to prevent your losses from exceeding the margin you put up, thereby avoiding account debt.
Key Point: The trigger condition usually depends on whether the Mark Price has reached your Liquidation Price.
7. Margin
Margin is the actual capital you use as collateral when opening a position.
Core Advantage: Futures allow for leverage, meaning you only need to provide 10% or even less of the capital to control 100% worth of the asset.
Risk Warning: Leverage is a double-edged sword. While it magnifies potential gains, it also brings your Liquidation Price closer. If margin is insufficient, the system will initiate forced liquidation.