How Does a Trader’s Position Size Influence Their ADL Ranking?
A larger position size generally leads to a higher ADL ranking, assuming all other factors like profitability and effective leverage are equal. This is because a large, profitable position provides a greater amount of collateral to cover the bankrupt trade's deficit in an ADL event.
Exchanges prioritize deleveraging the largest positions first to resolve the shortfall most efficiently with the fewest necessary closures.
Glossar
Larger Position Size
Leverage ⎊ Larger position size in cryptocurrency and derivatives markets directly correlates with leverage employed, amplifying both potential gains and inherent risks; prudent capital allocation necessitates a thorough understanding of margin requirements and liquidation thresholds specific to each exchange and instrument.
Position Size Influence
Allocation ⎊ The influence of position size on trading outcomes within cryptocurrency derivatives, options, and financial derivatives stems from its direct impact on risk exposure and potential reward.