Auto-Deleveraging (ADL) is the last line of risk control in futures trading on this platform. When a liquidation results in bankruptcy and the Insurance Fund is insufficient to cover the shortfall, the system forcibly reduces opposing positions ranked highest under the applicable rules, in order to maintain overall market solvency.
This article explains the basic logic of ADL, when it may be triggered, and the risk controls you can take. The latest product documentation of this platform shall prevail.
1. What is ADL?
In futures trading, profits and losses between long and short positions normally offset each other. In extreme market conditions, a losing position may not be closed smoothly in the market. Account equity may fall below the maintenance margin, and bankruptcy may occur (losses exceed the amount the account can cover).
In that case, this platform first uses the Insurance Fund (risk reserve) to absorb the bankruptcy shortfall. If the Insurance Fund is still insufficient, ADL is activated: instead of relying only on order-book matching, the bankrupt position is directly offset against the highest-ranked opposing positions in the queue.
Please note:
- ADL is not ordinary forced liquidation.
- ADL is not random position reduction, nor a penalty on profitable users.
- ADL is usually triggered only in extreme markets when the Insurance Fund is under pressure.
2. Why is ADL needed?
Without ADL, bankruptcy losses may become bad debt for the platform, or may have to be shared more broadly among users. The main purposes of ADL include:
- Protecting the Insurance Fund and the platform’s solvency, and preventing one-sided extreme moves from exhausting the overall risk buffer.
- Allocating extreme risk under transparent rules: positions with higher leverage and higher unrealized profit are reduced first, which relatively protects lower-leverage traders.
- Closing system exposure quickly and restoring market balance, instead of relying indefinitely on a thin order book.
3. Risk handling sequence
Futures risk control on this platform follows this sequence:
- Liquidation: When position margin is insufficient, the system takes over and attempts to close the position.
- Insurance Fund: If a bankruptcy shortfall arises, the Insurance Fund covers it first.
- ADL: If the Insurance Fund is insufficient, opposing positions are offset by ranking.
Mechanism | Triggered on | Purpose | Impact on you |
|---|---|---|---|
Liquidation | Positions with insufficient margin | Stop further losses on the account | Your position is forcibly closed |
Insurance Fund | Bankruptcy shortfall | Absorb bad debt and protect counterparties | Counterparties are usually unaffected |
ADL | Highest-ranked opposing positions | Close system exposure when the Insurance Fund is insufficient | Profitable positions may be forcibly reduced and profits realized early |
4. When may ADL be triggered?
On this platform, ADL may be triggered in the following situations:
- A bankruptcy or liquidation shortfall occurs: the liquidation fill is worse than the bankruptcy price, and losses exceed what the account can cover.
- The Insurance Fund for the relevant contract or asset is insufficient to take on more bankrupt positions, or falls below a preset threshold.
- Markets are highly volatile and liquidity is insufficient, so liquidation orders cannot be absorbed by the order book in time.
ADL is not automatically triggered merely because the price moves by a certain percentage. What matters is whether the bankruptcy size breaches the Insurance Fund buffer. Major assets and more liquid contracts usually have a lower trigger probability than small-cap or thinly traded contracts.
5. How does the system choose positions to reduce?
ADL does not select users at random. The system ranks opposing positions to the bankrupt position and offsets the highest-ranked ones first.
The ranking logic on this platform is:
The higher the unrealized profit and the higher the effective leverage, the higher the ADL ranking, and the earlier the position may be reduced.
Key factors include:
- Unrealized PnL ratio / ROI
- Effective leverage or maintenance margin utilization
- Profitable positions usually rank ahead of losing positions
How to read the ADL indicator
The trading interface shows a 1–5 light indicator:
- 1 light: Near the back of the queue; lower risk.
- 2–3 lights: Medium risk; monitor leverage and unrealized profit size.
- 4 lights: Near the front of the queue; consider reducing risk proactively.
- 5 lights: At the front of the queue; if ADL is triggered, your position will be among the first to be reduced.
The indicator reflects how far forward you are in the queue if ADL occurs. It is not a countdown. A full indicator does not mean ADL has already been triggered, but it does mean higher risk in extreme scenarios.
6. What happens if you are subject to ADL?
- Your position is partially or fully forcibly reduced. The reduced size usually matches what is needed to cover the bankruptcy shortfall and is not necessarily a full close-out.
- The execution price is generally the bankruptcy price or the mark price, subject to this platform’s rules.
- Unrealized PnL is settled early based on the fill. If the market continues in your favor, the reduced portion can no longer earn further profit.
- No trading fee is charged to the deleveraged party; liquidation-related fees may still apply on the liquidated side.
- You will receive a notification and can review ADL-tagged fills in your history.
After ADL, you usually keep profits already settled under the rules, as well as any remaining position that was not reduced. What you mainly lose is the right to continue holding that portion of the position and any potential further profit. Re-opening may also occur at a different entry price.
7. How can you reduce the probability of ADL?
There is no complete guarantee against ADL, but you can lower your ranking priority by:
- Lowering leverage: Effective leverage is a core ranking factor and is usually the most effective control.
- Partially taking profit or reducing size: Lower unrealized profit and position size.
- Adding margin: Reduce account effective leverage and maintenance margin pressure.
- Preferring major, highly liquid contracts: Liquidations are more likely to be completed in the order book, reducing pressure on the Insurance Fund.
- Controlling concentration: Avoid oversized exposure in a single instrument.
8. FAQ
1. Does being subject to ADL mean you lose money?
Not necessarily. ADL usually closes a profitable position early. What you mainly lose is the right to keep holding and any potential further profit, not an extra confiscation of principal. If the fill price is unfavorable, the settled result may also be lower than your expected unrealized profit.
2. Why are profitable positions reduced?
Because the bankrupt side can no longer cover further losses. To close the exposure, the system must match opposing positions. Ranking by high profit and high leverage allocates extreme risk more reasonably: positions that take higher risk and earn higher returns are also first in line for system deleveraging in extreme scenarios.
3. Is ADL common?
It is uncommon for major assets when liquidity is normal. It is more likely during extreme volatility, for small-cap contracts, thin order books, or when the Insurance Fund is under pressure. This platform seeks to delay or avoid ADL through the Insurance Fund and other measures whenever possible.
4. Will I be notified in advance?
This platform does not issue trade-by-trade advance warnings before trigger, but the positions page shows an ADL indicator. After trigger, details are usually sent by in-platform message or email. You should monitor the indicator in day-to-day trading rather than waiting for a warning notice.
5. Are ADL and liquidation the same?
No. Liquidation applies to the side with insufficient margin that is approaching bankruptcy. ADL applies to selected opposing positions when the Insurance Fund cannot cover the shortfall. They are different steps in the same risk chain.
6. Is cross margin always less likely to face ADL than isolated margin?
Not necessarily. What matters is effective leverage and unrealized return, not the margin mode itself. Cross margin may lower effective leverage when account balance is larger, but a large and highly profitable position can still rank near the front. Isolated margin is assessed on the position’s own leverage and return, so a high-leverage profitable position can also rank near the front.
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