What Is Auto-Deleveraging (ADL) and When Is It Used?

Auto-Deleveraging (ADL) is a risk management protocol used by exchanges as a last resort when the insurance fund is insufficient to cover losses from a liquidated position. It forcibly deleverages opposing profitable traders, starting with the most profitable and highest-leveraged ones.

This action is taken to ensure the solvency of the exchange and to prevent the socialized loss of all traders.