1. Why Risk Management Must Be Front and Center on Hyperliquid
Perpetual futures (perps) are powerful instruments—they offer leverage, directional bets, and capital efficiency. But they also amplify losses. On Hyperliquid, many of the traditional risks are magnified by speed, leverage, and automated strategies. Without strong rules, you’re not “trading smarter” — you’re gambling.
A single errant trade, unexpected volatility, or library bug can wipe out gains accrued over dozens of successful trades. The difference between staying solvent and being liquidated often comes down to risk control rules, not prediction skills.
Hence, your priority must be ensuring your strategies have robust, rule-based safety nets. Everything else flows from that.
2. Unique Perp Risks on Hyperliquid
Before building rules, you must understand the terrain. Hyperliquid, while high-performance comes with its own risk factors. Some prominent examples:
Low Liquidity / Slippage: Some perp markets are thin. Execution could get poor fills or gaps.
Smart Contract & Protocol Risk: Hyperliquid is newer; its contracts, bridge components, and chain logic are subject to bugs.
Oracle Manipulation / Price Feed Risk: Incorrect or manipulated oracles may trigger liquidations unjustly.
Margin / Liquidation Risk: If your margin is too tight or you overleverage, you may get liquidated in fast moves.
Intervention Risk: As seen in the “$JELLY incident,” Hyperliquid has sometimes intervened in extreme cases.
Network or Chain Downtime: If the L1 or systems go down, orders may not execute or be canceled in time.
These risks exist, but you can manage them—and reduce their destructive potential—via good Coinrule rules and discipline.
3. Core Risk Concepts Every Trader Needs
Here are concepts you must master to build safe strategies:
Risk per Trade: Always define how much of your capital you’re willing to lose on a single trade (e.g., 1%–5%).
Reward / Risk Ratio: Aim for setups where your potential reward is at least 2× or 3× your risk.
Position Sizing & Leverage Caps: The bigger your leverage, the smaller your margin for error.
Stop-Loss Discipline: A defined exit when the trade moves against you.
Volatility & Spread Filters: Only trade when conditions are favorable.
Margin Buffer / Liquidation Monitoring: Always keep a buffer over your liquidation threshold.
Replacement / Timeout Logic: Avoid lingering stale or poor orders.
Fail-Safe / Emergency Rules: Pull the plug and cancel orders if conditions go bad.
When you bake these into your rules, your strategy becomes resilient.
4. How Coinrule’s Architecture with Hyperliquid Enables Rule-Based Risk
Coinrule + Hyperliquid is a synergy:
Non-custodial & signature-based: Coinrule never holds your funds or keys. All trades, stops, and order cancellations are signed by your wallet.
limits.trade feature: You can place maker-only orders that dynamically adjust (chase/replace) rather than static limits.
Rule builder: You can set conditions, triggers, safety logic, layered constraints—all via rules.
Multiple rule types: You can combine strategy logic and risk logic in parallel.
No need for API keys: You don’t rely on centralized APIs or external bots, reducing one layer of failure.
Live cancellation & replacement: Because Hyperliquid allows cancel-first priority, Coinrule rules that cancel and reissue orders are safer in volatile conditions.
Thus, you can define not just “when to trade” but “when to stop trading, de-risk, or bail out,” in a fully automated way.
Given that, let’s build rule types you should ideally have to manage perp risk.
5. Key Coinrule Rules for Managing Perp Risk
Below are the essential risk-control rules I strongly recommend incorporating into every strategy.
5.1 Position Sizing & Leverage Caps
Rule: Limit Max Position / Leverage
Always enforce a cap on the size of a position relative to your capital or on the leverage factor (e.g., max 10×).
E.g.: If account equity = $10,000, set that any new open position cannot exceed $1,000 or 5× leverage.
This prevents a single trade from bankrupting your account.
Rule Implementation
IF new_signal AND current_position_size + new_size > MAX_ALLOWED
THEN skip or scale down the order
Every rule launching trades should include a sizing guard.
5.2 Stop‑Loss / Safety Exit Rules
Rule: Exit on adverse move
As soon as a loss threshold is triggered (e.g. –2%, –3% relative to entry), close position or reduce. Risk control rather than hoping.
Use a stop-limit or market exit depending on liquidity.
Example rule:
IF current_price < entry_price * (1 – stop_loss_pct)
THEN exit position
Coinrule supports such defensive rules to “promptly sell part of your holdings” on a sudden drawdown.
5.3 Volatility / Spread Filters
Don’t trade in chaotic conditions.
Rule: Only trade if volatility < X, spread < Y
Measure recent ATR, or spread over mid-price
If volatility or spread too high, disable new entries, or pause replacements
This prevents opening in highly uncertain conditions where liquidation risk is amplified.
5.4 Order Replacement / Timeout Logic
Because limits.trade may cancel & reissue limit orders:
Ensure you have the maximum replacement count per order
Add timeout: if not filled by X seconds or minutes, cancel and stop trying
Or escalate to a market action if the trend is confirmed
Example:
IF attempts > max_replaces OR elapsed_time > time_limit
THEN cancel order, backing off or exiting
This avoids infinite “chase loops” that bleed capital.
5.5 Liquidation Buffer Monitoring
While Hyperliquid handles margin and liquidations, you still must guard:
Monitor margin ratio or “distance to liquidation”
If your buffer shrinks below a safe threshold (e.g., 20% cushion), cancel open orders or reduce exposure
Don’t push aggressive trades when the margin is tight
5.6 Portfolio Hedging or Stop Zones
If you run multiple positions:
Rule: If overall portfolio drawdown > X%, exit all trades
Or hedge: open offsetting small positions to reduce directional exposure
Use “stop zones” (e.g., if BTC sells off 5%, cancel risky altcoin trades)
Such portfolio-level safety nets limit cascading losses.
6. Example Rule Flows & Pseudocode
Here’s a combined strategy with risk logic built in (pseudocode):
Rule “Safe Breakout Entry”:
IF price breaks above resistance AND volume surges
THEN place limits. Trade maker buys with size = 2% of capital
Risk Controls (parallel):
– If open position > 5x leverage → do not open
– If volatility or spread > threshold → suppress entry
– If position returns < –3% → exit
– Replace limit orders only up to 3 times and within 60 seconds
– If margin buffer < 20% → cancel orders and exit
– If portfolio DD > 7% → pause strategy entirely
You can build this in Coinrule via two or more rule modules:
1. Entry rule
2. Risk rules (stop/cancel/disable)
3. Replacement logic settings
This modularity is what lets you trade smarter.
7. Monitoring & Metrics to Track in Live Execution
When your strategies run live, you must monitor:
- Fill rate vs replacement count
- Leverage/margin ratio
- Drawdown per trade & cumulative
- Volatility and spread drift
- Shutdown events triggered
- Missed exits or slippage on the stop
Use dashboards or alerts (e.g., via email, Slack) to flag anomalies. If a rule misbehaves, shut it off manually.
8. Crisis Handling & Fail‑Safe Patterns
Markets surprise you. You must plan for scenarios like flash crashes, chain lag, or oracle glitches.
Best practices:
- Emergency cancel rule: a hotkey-triggered rule to cancel all open orders
- Circuit breaker rule: if asset price moves > X% within Y secs, disable further new entries
- Margin reversion rule: if the margin buffer dips < threshold, withdraw or reduce positions
- Backup exit rules: secondary exit rules in case the primary fails
- Manual override: ability to intervene manually (stop trading, pull positions)
These rules are your break-glass tools when things devolve.
9. Integrating Dynamic Risk Adjustments Over Time
Your risk rules shouldn’t be static. As markets evolve:
Adjust stop-loss % or buffer widths based on realized volatility
Scale in/out more aggressively in calm vs volatile regimes
Rotate to safer pairs when protocol or chain risk is high
Use trailing risk rules: if your PnL increases, tighten stops or reduce risk per trade
You can embed these conditional adjustments in Coinrule rules i.e., “if volatility spikes, reduce size or disable new entries.”
10. Conclusion & Next Steps
“Trade smarter, not harder” is more than a slogan — it’s survival in leveraged markets. On Hyperliquid, where speed and leverage amplify both profit and risk, you must have strong, automated risk rules baked into your strategies.
Coinrule’s architecture with limits. trade gives you the toolbox:
- Maker-only adaptive orders with minimal slippage
- Modular IF/THEN rules to codify exits and safeguards
- Wallet-signature, non-custodial trades
- Cancel-first execution support in Hyperliquid
If you build properly, with position caps, stop rules, volatility filters, replacement limits, and fail-safes, you protect your capital while letting your strategy hunt opportunistically.
Start building your strategy with Coinrule now
