Hyperliquid Glossary - DeFi & Trading Terms Explained

Whether you are placing your first trade or exploring Hyperliquid's ecosystem, understanding the terminology is essential. This glossary covers the most important trading, DeFi, and Hyperliquid-specific terms you will encounter.

Use the headings below as quick-reference anchor links. Each definition is written to give you practical understanding, not just textbook theory.

Trading Basics

Perpetual Futures

A perpetual futures contract (commonly called a "perp") is a derivative that tracks the price of an underlying asset without an expiration date. Unlike traditional futures that settle on a fixed date, perps can be held indefinitely. Traders profit from price movements without owning the underlying asset. Perps use a funding rate mechanism to keep the contract price anchored to the spot market price. On Hyperliquid, all perps settle in USDC and support leverage up to 50x on major pairs. Learn more in our how to trade guide.

Funding Rate

The funding rate is a periodic payment exchanged between long and short traders to keep the perpetual futures price aligned with the spot price. When the perp price trades above spot (positive funding), longs pay shorts. When it trades below spot (negative funding), shorts pay longs. On Hyperliquid, funding is calculated and settled every hour. Monitoring funding rates is important because holding a position during high funding can eat into profits, or provide additional income if you are on the receiving side. Check live funding on our tools page.

Mark Price

The mark price is the fair value of a perpetual futures contract, calculated using a combination of the index price (oracle) and the funding rate basis. Hyperliquid uses the mark price - not the last traded price - to determine liquidation thresholds and unrealized PnL. This prevents market manipulation through artificial price spikes from triggering unnecessary liquidations.

Oracle Price

The oracle price is the real-time spot price of an asset fetched from external data sources. Hyperliquid uses a decentralized set of validators as oracles to feed accurate price data on-chain. The oracle price anchors the mark price and ensures the perpetual contract tracks the actual market value of the underlying asset. If the oracle price and perp price diverge significantly, the funding rate adjusts to pull them back together.

Liquidation

Liquidation occurs when your position's losses consume enough of your margin that your account can no longer meet the maintenance margin requirement. The protocol automatically closes your position to prevent further losses. On Hyperliquid, liquidation is handled by the HLP vault, which backstops liquidated positions. To avoid liquidation, use conservative leverage, set stop-losses, and monitor your margin ratio. See our leverage trading guide for risk management strategies.

Margin

Margin is the collateral you deposit to open and maintain a leveraged position. Initial margin is the minimum amount required to open a position - for example, 10x leverage requires 10% of the position size as initial margin. Maintenance margin is the minimum collateral you must maintain to keep the position open; falling below this triggers liquidation. On Hyperliquid, margin is denominated in USDC.

Leverage

Leverage allows you to control a larger position with a smaller amount of capital. If you use 10x leverage, a $100 margin controls a $1,000 position. This amplifies both profits and losses proportionally. Hyperliquid offers up to 50x leverage on BTC and ETH, with lower maximums on smaller-cap assets. Higher leverage means higher liquidation risk - your position gets liquidated faster if the price moves against you. Our leverage guide covers how to use it responsibly.

Open Interest

Open interest (OI) is the total value of all outstanding perpetual futures contracts that have not been closed or settled. High open interest indicates an actively traded market with strong participation. Rising OI alongside rising price suggests new money entering long positions. Falling OI suggests positions are being closed. Hyperliquid displays open interest per market on the trading interface and on our markets page.

Long and Short

Going long means buying a perpetual contract expecting the price to rise - you profit when the price goes up and lose when it goes down. Going short means selling a contract expecting the price to fall - you profit when the price drops and lose when it rises. Hyperliquid makes shorting just as easy as going long with a single click. Learn how in our shorting guide.

Hyperliquid-Specific Terms

HLP (Hyperliquidity Provider)

HLP is Hyperliquid's native market-making vault. It provides liquidity across all perpetual futures markets by running automated market-making strategies on-chain. Users can deposit USDC into HLP to earn a share of the vault's trading profits and fees. HLP serves as the primary liquidity source on the platform and also backstops liquidations. For a deep dive, read our HLP explained guide.

HYPE Token

HYPE is Hyperliquid's native governance and utility token. It can be staked to secure the network's proof-of-stake consensus and to earn fee tier discounts through staking tiers (Wood, Silver, Gold, Platinum, Emerald, Diamond). HYPE was distributed through one of crypto's largest airdrops in November 2024. Learn about tokenomics, staking, and utility in our HYPE token guide.

USDH

USDH is Hyperliquid's native stablecoin, pegged 1:1 to the US dollar. It is minted on HyperEVM through Felix Protocol by depositing collateral (primarily HYPE). USDH serves as an alternative quote asset for trading on Hyperliquid. Markets quoted in USDH (called "aligned" markets) receive lower taker fees and higher maker rebates. Read our USDH stablecoin guide for details.

HyperEVM

HyperEVM is Hyperliquid's Ethereum-compatible execution environment, built directly into the Hyperliquid L1 blockchain. It runs alongside HyperCore (the trading engine) and allows developers to deploy Solidity smart contracts that can interact with Hyperliquid's order book, vaults, and assets. This enables DeFi protocols like Felix, HyperLend, and Kinetiq to build on top of Hyperliquid's infrastructure. See our HyperEVM explainer.

HyperCore

HyperCore is the native execution layer of the Hyperliquid L1 that handles the core trading infrastructure - the order book, matching engine, margin system, and settlement. It operates at significantly higher performance than the EVM, achieving sub-second finality and processing thousands of orders per second. HyperCore and HyperEVM run side by side on the same chain, sharing state and composability.

HIP-1 (Native Spot Token Standard)

HIP-1 is the standard for listing native spot tokens on Hyperliquid. Projects deploy a token under HIP-1 to make it tradable on Hyperliquid's spot order book. Token tickers are auctioned through a Dutch auction process to prevent squatting. HIP-1 tokens are native to the Hyperliquid L1 and benefit from the same zero-gas trading as perpetual futures.

HIP-2 (Hyperliquidity for Spot)

HIP-2 provides automatic on-chain liquidity for HIP-1 spot tokens. When a project deploys a token with HIP-2, the protocol automatically seeds an order book with liquidity at launch, eliminating the need to recruit external market makers. This ensures every new spot token has baseline liquidity from day one.

HIP-3 (Builder Codes)

HIP-3 enables permissionless perpetual futures markets through builder codes. Anyone can deploy a new perp market on Hyperliquid by paying a listing fee and setting custom fee parameters. This is how trade.xyz lists equity and commodity perps, and how other builders create niche markets. HIP-3 markets have separate fee tiers (0.09% taker, 0.03% maker). Explore our HIP-3 builder codes guide.

HIP-4 (Outcome Trading)

HIP-4 introduces binary outcome markets (prediction markets) on Hyperliquid. These contracts settle at either 0 or 1 based on real-world event outcomes - elections, sports results, economic data releases. HIP-4 markets use the same order book infrastructure as perps but with binary payoff structures. Read our HIP-4 outcome trading guide.

Cross-Margin

Cross-margin mode uses your entire available account balance as collateral for all open positions. If one position is losing money, your other positions' margin and free balance help prevent liquidation. This is more capital-efficient but means a single large loss can affect your entire account. Cross-margin is the default mode on Hyperliquid. Learn more in our unified accounts guide.

Isolated Margin

Isolated margin dedicates a specific amount of collateral to a single position. Your maximum loss is limited to the margin assigned to that position - the rest of your account balance is protected. The tradeoff is a tighter liquidation price since the position has less collateral backing it. Hyperliquid lets you switch between cross and isolated margin per position.

Order Types

Market Order

A market order executes immediately at the best available price in the order book. You are guaranteed a fill but not a specific price - in fast-moving or illiquid markets, the execution price may differ from what you see (this is called slippage). Market orders are "taker" orders and incur taker fees (0.045% base tier on Hyperliquid perps). Best for when you need to enter or exit a position quickly.

Limit Order

A limit order lets you specify the exact price at which you want to buy or sell. Your order sits in the order book until the market reaches your price. If the market never reaches it, the order is not filled. Limit orders that add liquidity to the book are "maker" orders and receive lower fees (0.015% base tier). Limit orders give you price control at the cost of execution certainty.

Stop-Loss Order

A stop-loss is a conditional order that triggers when the price reaches a specified level, designed to limit losses on an existing position. For example, if you are long BTC at $60,000, you might place a stop-loss at $58,000. When the mark price hits $58,000, your stop-loss converts to a market order and closes the position. Always use stop-losses to manage risk. Our order types guide covers advanced configurations.

Take-Profit Order

A take-profit order is the opposite of a stop-loss - it automatically closes your position when the price reaches a target profit level. If you are long BTC at $60,000, a take-profit at $65,000 locks in gains without requiring you to watch the market. Hyperliquid supports setting stop-loss and take-profit simultaneously (bracket orders) so you can define both your risk and reward upfront.

TWAP (Time-Weighted Average Price)

TWAP is an advanced order type that splits a large order into smaller pieces executed over a set time period. Instead of placing one large market order that could move the price against you, TWAP spreads execution across minutes or hours to achieve a better average entry price. On Hyperliquid, TWAP is particularly useful for large positions in less liquid markets. See our order types guide for setup instructions.

Scaled Orders

Scaled orders (also called laddered orders) automatically place multiple limit orders across a price range you define. For example, you can set 10 buy orders evenly distributed between $55,000 and $58,000 for BTC. This lets you build a position gradually as the price dips, achieving a better average entry than a single order. Hyperliquid's native scaled orders are covered in our order types guide.

DeFi Concepts

DEX (Decentralized Exchange)

A decentralized exchange is a trading platform that operates without a central authority. Unlike centralized exchanges (Binance, Coinbase), DEXs let you trade directly from your wallet without depositing funds into a company's custody. Hyperliquid is a DEX, but unlike AMM-based DEXs, it uses a fully on-chain order book - combining the non-custodial benefits of DeFi with the performance of centralized trading. Compare Hyperliquid to centralized exchanges in our comparison guides.

AMM (Automated Market Maker)

An AMM is a DeFi protocol that uses mathematical formulas and liquidity pools instead of a traditional order book to facilitate trades. Traders swap against a pool of tokens rather than matching with other traders. While AMMs like Uniswap pioneered decentralized trading, they suffer from slippage on large trades and impermanent loss for liquidity providers. Hyperliquid uses an order book instead of an AMM, which provides tighter spreads and deeper liquidity.

TVL (Total Value Locked)

TVL represents the total amount of assets deposited in a DeFi protocol. It is a common metric for measuring the size and health of DeFi platforms. Higher TVL generally indicates greater user trust and utility. On Hyperliquid's ecosystem, TVL is distributed across HLP, HyperLend, Felix, and other HyperEVM DeFi protocols.

Slippage

Slippage is the difference between the expected price of a trade and the actual execution price. It occurs when there is not enough liquidity at your target price, so your order fills across multiple price levels in the order book. Large market orders in low-liquidity markets experience the most slippage. Hyperliquid's deep liquidity and order book model minimizes slippage on major pairs, but you should still use limit orders for precise execution on large trades.

Vault

A vault is a smart contract that pools user deposits and executes a specific strategy. On Hyperliquid, vaults can run automated trading strategies - the most prominent being HLP. Anyone can create a vault on Hyperliquid and set a management fee. Depositors earn (or lose) proportional to the vault's performance. Vaults make sophisticated strategies accessible to passive investors. Explore options in our vaults guide.

Summary

This glossary covers the core terminology you need to navigate Hyperliquid and DeFi trading confidently. As the platform evolves and new features launch, we will keep this page updated.

Recommended next steps:

• New to Hyperliquid? Start with our complete beginner's guide
• Ready to deposit? Follow the USDC deposit guide
• Want to explore the ecosystem? Read the DeFi ecosystem overview
• Understand fees? See our fees explained guide