What is Auto-Deleveraging?
Auto-Deleveraging (ADL) is a mechanism used to control the platform's overall risk when extreme market conditions or force majeure events result in an insufficient insurance fund. In such cases, the counterparty's forced liquidation mechanism is triggered. This operation is called Auto-Deleveraging (ADL). It helps spread risk by liquidating positions, and profits can be withdrawn at any time.
Trigger Conditions:
A large number of positions are forcibly liquidated, causing significant contract losses for the platform.
The insurance fund is insufficient to cover potential losses from forced liquidation.
How It Works:
Deleveraging Selection: The ranking of counterparties for ADL is determined by account risk, position risk, and the profitability of the contract position.
Deleveraging Process: When a trader is selected by the auto-deleveraging system, any unfilled orders will be canceled. The system will then forcibly match orders based on the bankruptcy price of the forced liquidation position. If the trader's position is partially reduced, the remaining contract amount will decrease, and the trader's ranking in the auto-deleveraging queue will drop accordingly.
Note: For users in cross margin mode with no leverage limit set, the system will default to using the user's maximum available leverage for the position.