Auto-Deleveraging (ADL) is a core risk control mechanism in cryptocurrency contract trading. During extreme market conditions, it covers over-loss positions by forcibly liquidating profitable positions to maintain exchange system stability.
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Trigger Conditions
- Insufficient Liquidation Funds: When a user’s position is liquidated but the proceeds are insufficient to cover the debt (i.e., "over-loss") due to:
✓ Low market liquidity
✓ Severe price slippage
- Inadequate Insurance Fund: The exchange’s Insurance Fund cannot fully cover the over-loss.
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Execution Method
- Counterparty Selection: The system selects counterparties (profitable traders) based on:
✓ Profit ratio
✓ Position size
✓ Priority ranking
- Forced Position Reduction: Partial or full liquidation of selected positions.
✓ Higher-profit positions may be prioritized for ADL.