Polymarket Perps Liquidation Explained: Margin Math and the ADL Queue (October 2026)
Liquidation on Polymarket Perps begins the moment account equity drops below maintenance margin, which is a flat 0.5 / MaxLeverage of notional — 2.5% on a 20x market, 5% on a 10x one. The system closes the position with reduce-only immediate-or-cancel orders, and if the position is too far underwater, an insurance fund absorbs it before auto-deleveraging kicks in against opposite-side traders.
When exactly does liquidation trigger?
The trigger is a margin ratio:
MarginRatio = Equity / MaintenanceMarginLiquidation starts when MarginRatio < 1.0. Cross and isolated positions are checked independently: cross uses the account’s combined equity and combined maintenance margin; each isolated position stands on its own allocation. Margin health is re-evaluated continuously — a new mark price, fill, or deposit can push an account across the threshold at any moment.
What are the margin states?
| State | Condition | What you can do |
|---|---|---|
| Healthy | Equity ≥ IM | Trade normally |
| Margin call | MM ≤ Equity < IM | Reduce-only or deposit |
| Liquidation | Equity < MM | System closes positions |
A deposit during margin call restores healthy status instantly. Between the states, the buffer is what keeps you alive: at 20x the margin-call-to-liquidation gap is thin, at 5x it is wide.
What happens mechanically during liquidation?
The documented sequence:
- The account (or isolated position) is flagged; new orders in scope are rejected
- Resting orders in the same scope are cancelled
- Positions close via reduce-only, market-priced IOC orders that sweep whatever liquidity is resting — there is no protective distance from mark
- Every liquidation fill pays the normal fee plus a per-market liquidation fee:
FillFee = Notional × (MakerOrTakerRate + LiquidationFeeRate)
Cross liquidation closes one position at a time, re-evaluating between cycles. Isolated liquidation closes the flagged position in full. If equity recovers to the recovery initial margin mid-process, the flag clears and normal trading resumes.
When does the insurance fund step in?
When equity falls below roughly two-thirds of maintenance margin, order-book liquidation is unlikely to recover value. The system then skips the book:
- Cross backstop: all cross positions plus the quote balance move into the insurance-fund account
- Isolated backstop: the specific position and its allocation are absorbed
The fund only takes positions it can hold while staying above its own maintenance margin. When even the fund cannot safely absorb the breach, auto-deleveraging (ADL) begins.
How does auto-deleveraging choose victims?
ADL force-closes opposite-side positions, ranked by:
AdlIndex = ProfitRatio × Notional / EquityThe most profitable, most leveraged counterparties are deleveraged first — reduced, never flipped. An isolated liquidation deleverages only that market; a cross liquidation can touch every open cross position. Execution price is the liquidated position’s bankruptcy price (isolated) or the frozen mark price at trigger (cross), and ADL fills carry no fee for either side.
Can I withdraw collateral with positions open?
Yes, but withdrawals must leave the greater of existing margin reservations and 10% of total open-position notional at mark. A $100 position at 20x needs $5 initial margin but a $10 withdrawal reserve — above 10x leverage, the withdrawal floor is stricter than the opening margin.
FAQ
Q: What maintenance margin does Polymarket Perps use? A: A flat rate per market: MMR = 0.5 / MaxLeverage — 2.5% of notional on 20x markets, 5% on 10x, independent of your own leverage setting or position size.
Q: Does my own leverage setting change the liquidation threshold? A: No. Initial margin scales with your configured leverage; maintenance margin stays flat per market. Lower leverage only widens the buffer between entry and liquidation.
Q: What is the liquidation fee? A: An extra per-market rate on top of the normal maker/taker rate, charged on every fill while the account is flagged. Fetch live values from the instruments endpoint.
Q: Can ADL hit me even when I’m profitable? A: Yes — that is by design. The AdlIndex ranks the most profitable and most leveraged opposite-side accounts first, so a runaway winner is the first to be partially closed when the insurance fund cannot cover a liquidation.
Q: Why did my liquidation price move without any action from me? A: For cross positions, the threshold depends on the whole account: mark moves on other positions, size changes, or collateral changes all shift every cross liquidation price simultaneously.
Sources
Disclaimer
Not financial advice. Educational purposes only. Updated October 2026.
