What Is ‘Auto-Deleveraging’ (ADL) and Why Is It a Last Resort?
ADL is a risk management mechanism that forcibly closes the positions of profitable traders to cover the losses of a bankrupt account when the insurance fund is insufficient. It is a last resort because it negatively impacts profitable traders who are not at fault.
The system ranks traders by profitability and leverage, closing the highest-ranked first. This ensures market stability when extreme volatility depletes the insurance fund.
