Auto-Deleveraging (ADL)
Glossary · Derivatives
Auto-deleveraging (ADL) is an exchange's last-resort mechanism when a liquidation can't be filled and the insurance fund can't absorb the loss: profitable traders on the opposite side get part of their position force-closed at the bankruptcy price. Rankings close the highest-profit, highest-leverage accounts first, so the winners pay for the blowup.
"When a blowup is too big for the exchange to find a buyer, it takes the loss out of the winners — yes, you can be up big and still get force-closed."
The chain: your counterparty gets liquidated → the engine tries to close their position in the order book → if price gapped so far that the position is past its bankruptcy price and the insurance fund can't cover the hole, ADL fires. The exchange ranks traders on the winning side by profit and leverage, then force-closes the top of the queue at the bankruptcy price — no slippage, no choice, no warning beyond the little ADL indicator (those 4–5 bars on your position row) filling up.
ADL stings because it takes your best trades: it truncates the exact runner that was working, usually mid-move, and re-entry is almost always worse. If your ADL indicator is fully lit during a violent one-way move, you're first in the queue — banking partials there isn't weakness, it's queue management. It's rare on BTC, where insurance funds run deep, and much more real on thin alt perps. One more reason a fat green levered position on an illiquid pair is never as locked-in as it looks.
Related jargon
Questions
- What is Auto-Deleveraging in crypto trading?
- Auto-deleveraging (ADL) is an exchange's last-resort mechanism when a liquidation can't be filled and the insurance fund can't absorb the loss: profitable traders on the opposite side get part of their position force-closed at the bankruptcy price. Rankings close the highest-profit, highest-leverage accounts first, so the winners pay for the blowup.
- How would a trader say it?
- When a blowup is too big for the exchange to find a buyer, it takes the loss out of the winners — yes, you can be up big and still get force-closed.
Part of the Crypto Jargon glossary — every term, decoded the way a trader would say it.
Crypto Jargon
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