Hyperliquid ADL (Auto-Deleveraging) Explained: Why Winning Positions Get Closed and How to Lower Your Risk

The short version: Auto-deleveraging (ADL) is Hyperliquid's last line of defense against bad debt. When a liquidated account's value goes negative, Hyperliquid closes positions of traders on the opposite, winning side, at the previous mark price. Who goes first is decided by one formula: (mark_price / entry_price) × (notional_position / account_value). Big profit plus high leverage puts you at the front of the queue. You can't opt out, but you can make yourself a much less likely target.

On October 10–11, 2025, many Hyperliquid traders learned what ADL means the hard way: profitable shorts closed in the middle of the biggest crash of the year, delta-neutral hedges suddenly left one leg naked, and a lot of traders were left asking why a winning position had simply disappeared. Hyperliquid's founder Jeff Yan later confirmed it was the first cross-margin ADL in more than two years of operation, and that the exchange had no bad debt.

This guide explains exactly how ADL works on Hyperliquid, how the ranking queue is calculated (with a worked example), what it does to your PnL and hedges, how to check whether one of your positions was auto-deleveraged, and the practical habits that keep you out of the front of the queue.

What auto-deleveraging is (and isn't)

Every perp trade has two sides. When a losing trader is liquidated, someone has to absorb the loss so the winning side can be paid. Hyperliquid stacks three layers of protection, and ADL only fires when the first two have failed:

1. Liquidation through the order book. When account equity drops below maintenance margin, Hyperliquid sends market orders to the book to close the position. Anyone can take the other side, and if the close succeeds, the trader keeps whatever collateral is left. For positions above 100k USDC, only 20% is sent at first (partial liquidation).
2. Backstop liquidation by the liquidator vault. If equity falls below two-thirds of maintenance margin without a successful book liquidation, the position and its margin are transferred to the liquidator vault, a component strategy of HLP. The maintenance margin is not returned to the user.
3. Auto-deleveraging. If an account value, or an isolated position's value, becomes negative, there is a hole that no collateral covers. Hyperliquid then closes positions held by traders on the opposite side, ranked by profit and leverage, so the platform never carries bad debt.

Two things ADL is not:

• It is not a liquidation of you. You are in profit when it happens. Your position is closed against the underwater account, so you lock in a gain, just not the one you planned.
• It does not touch people without positions. Hyperliquid's docs state a strict invariant: a user with no open positions never socializes the platform's losses. Spot holders and flat accounts are never ADL'd.

If you want the full picture of steps 1 and 2, our Hyperliquid liquidation guide covers the liquidation price formula and partial liquidations in depth.

The ADL queue formula, explained

When ADL triggers, Hyperliquid ranks every trader on the opposite side of the underwater position by this index (from the official docs):

ADL score = (mark_price / entry_price) × (notional_position / account_value)

It's two ratios multiplied together:

• mark_price / entry_price measures how far in profit you are. For a long that has gone from 2,000 to 2,600, it's 1.3. (For shorts the logic is mirrored: the bigger your unrealized gain on the winning side, the more this part of the score works against you.)
• notional_position / account_value is your effective leverage: position size divided by equity, where equity includes unrealized PnL. A 50,000 USDC position on a 10,000 USDC account scores 5.

The highest score is closed first, at the previous mark price, against the underwater account, until the hole is filled. Backstop-liquidated positions get no special treatment in the queue.

Note what is not in the formula: the leverage number you picked on the slider. What counts is your real notional versus your real equity at that moment. A cross account at "3x" that has piled on more positions can be far more levered than the slider suggests.

Worked example: who gets deleveraged first?

Imagine a violent ETH squeeze. A massively levered short gets blown out and its account value goes negative. The traders on the opposite side are ETH longs, and the mark is now 2,600.

Trader	Entry	Profit ratio (mark/entry)	Notional	Account value	Leverage ratio	ADL score
A	2,000	1.30	26,000	5,200	5.0	6.50
B	1,500	1.73	52,000	26,000	2.0	3.47
C	2,400	1.08	10,400	10,400	1.0	1.08

Trader B has the biggest percentage gain, yet Trader A is first in line, because A's effective leverage is 2.5 times higher. Trader C, close to break-even and unlevered, is very unlikely to be touched unless the hole is huge.

The takeaway: leverage multiplies your ADL exposure just as much as profit does. Halving your effective leverage halves your score.

What ADL does to your PnL

When you are auto-deleveraged, all or part of your position is closed at the previous mark price. In practice that means:

• Your profit is realized, not lost. The unrealized gain up to that mark price becomes realized PnL. You don't get liquidated and you keep your collateral.
• You lose the rest of the move. ADL happens precisely during extreme moves, so the position is often closed right before the trend continues in your favor. That missed upside is the real cost.
• Your plan breaks. TP/SL orders attached to a position that no longer exists are irrelevant, and your planned exit size or scaling no longer applies.
• Your hedges can break, which is the dangerous part. If you were long on Hyperliquid and short the same asset somewhere else (a funding-rate trade, a basis trade, or a hedge for a spot bag), ADL closes one leg and leaves the other fully exposed in the most volatile market of the year. For delta-neutral traders, this is the single biggest ADL risk.

Jeff Yan's own summary after the event was that ADL lets traders close positions at temporarily favorable prices, realizing significant gains, while acknowledging that some ADL'd trades turned out badly in hindsight. Both are true, and which one you experience depends mostly on what you held alongside the ADL'd position.

The October 2025 ADL event in numbers

The October 10–11, 2025 crash triggered the largest wave of liquidations in crypto history across venues. On Hyperliquid, book liquidations and the HLP backstop could not absorb every underwater account in time on some markets, so cross-margin ADL fired for the first time since launch. Hyperliquid's founder confirmed 100% uptime and no bad debt.

Community researchers who pulled Hyperliquid's raw node fills for the worst hour (Oct 10, 21:00 UTC, which is 23:00 in Madrid) counted roughly 35,000 ADL fills, about 2.5% of all fills in that hour, according to one public analysis on GitHub. The exact count depends on methodology, but the lesson is clear: in a true cascade, ADL is not a theoretical edge case. It hits thousands of positions in minutes, and the ones it hits are the profitable, levered ones.

How to check if your position was auto-deleveraged

ADL closes show up in your trade history as fills with a direction label of "Auto-Deleveraging" instead of "Close Long" or "Close Short". You can check in three ways:

1. Hyperliquid's own UI: look at Trade History around the time your position vanished.
2. The public API: query your fills and filter by direction. No keys needed:
   curl -s https://api.hyperliquid.xyz/info -H 'Content-Type: application/json' -d '{"type":"userFills","user":"0xYOUR_ADDRESS"}' | jq '.[] | select(.dir=="Auto-Deleveraging")'
   The dir field is a display label rather than a formal enum, and userFills only returns your most recent 2,000 fills, so for older events use userFillsByTime with a time range.
3. A portfolio tracker: paste the address into Hyperfolio and review the closed PnL and fills for that window alongside what's still open, so you can see at a glance whether a hedge leg was left exposed.

How to lower your ADL risk: 7 practical rules

You can't disable ADL, and you shouldn't want to: it's what keeps the exchange solvent. But because the queue is a simple formula, you can control your place in it.

1. Keep effective leverage low on big winners. The second half of the formula is notional divided by equity. Adding margin, or trimming size, directly lowers your score.
2. Take partial profits during violent moves. The first half of the formula grows with your unrealized gain. A trade that is up 60% on high leverage is exactly the profile ADL targets first. Banking part of it lowers both ratios.
3. Don't trust cross-venue hedges in a cascade. If one leg sits on Hyperliquid and the other elsewhere, assume the Hyperliquid leg can be closed without warning. Size it so a naked hedge leg would not wipe you out. Our funding arbitrage guide covers how to size these trades.
4. Be extra careful in thin markets. ADL starts when liquidations can't be absorbed. That happens far more easily in small-cap perps with shallow books than in BTC or ETH.
5. Watch real leverage, not the slider. In cross margin your real leverage changes with every position you add and every move in unrealized PnL. Our isolated vs cross margin guide explains how each mode behaves.
6. Size from risk, not from max leverage. A position size calculator keeps both liquidation and ADL exposure in a sensible range from the start.
7. Review after every big event. Check whether anything was ADL'd, what was realized, and whether anything is still exposed. Doing this within minutes, not hours, is what turns a surprise into a manageable situation.

ADL vs liquidation vs backstop: quick comparison

	Book liquidation	Backstop liquidation	Auto-deleveraging
Who is affected	The losing trader	The losing trader	Winning traders on the opposite side
Trigger	Equity below maintenance margin	Equity below 2/3 of maintenance margin	Account or isolated position value below zero
Price used	Market orders on the book	Transfer to the liquidator vault	Previous mark price
What you keep	Any remaining collateral	Nothing of the liquidated cross or isolated margin	Your realized profit and collateral
How often	Constantly	Occasionally	Rarely, in extreme events

Frequently asked questions

What does ADL mean on Hyperliquid?

ADL stands for auto-deleveraging. When a liquidated account's value goes negative, Hyperliquid closes positions of profitable traders on the opposite side at the previous mark price so the exchange never carries bad debt.

Do I lose money when I get auto-deleveraged?

Not directly. Your position is closed in profit at the previous mark price, so the gain is realized. The cost is the move you miss afterward, plus any risk created if that position was hedging something else.

How is the ADL order decided?

By the index (mark_price / entry_price) × (notional_position / account_value). The highest score, meaning big profit combined with high effective leverage, is deleveraged first.

Can I be ADL'd if I have no open positions?

No. Hyperliquid's docs guarantee that a user with no open positions never socializes the platform's losses.

Does HLP prevent ADL?

HLP, through its liquidator vault strategy, takes over positions in backstop liquidations, which absorbs much of the stress. ADL only happens when an account's value is already negative, meaning the buffers were not enough for that position.

How often does ADL happen on Hyperliquid?

Rarely. Before October 2025 it had only occurred occasionally on isolated positions. The October 10–11, 2025 crash was the first cross-margin ADL since launch.

How do I see if I was auto-deleveraged?

Look for fills labeled "Auto-Deleveraging" in your Hyperliquid trade history, query userFills through the public API, or paste your address into a read-only tracker like Hyperfolio and review fills and closed PnL for that period.

Know where you stand before the next cascade

ADL rewards traders who know their real numbers: actual leverage across all positions, unrealized profit per trade, and which positions are hedging each other. Hyperfolio is a free, read-only Hyperliquid portfolio tracker: paste any address (main account, sub-accounts, or wallets you follow) and see open positions, leverage, unrealized and closed PnL in one place, with no private keys and no signup. Check your exposure today at app.hyperfolio.fun, before the market checks it for you.