What Is the Risk of ‘Auto-Deleveraging’ (ADL) in High-Leverage Perpetuals?

Auto-Deleveraging (ADL) is a risk management system where a profitable trader's position is partially deleveraged (closed) to cover the losses of a liquidated trader when the insurance fund is insufficient. This system is a last resort.

The risk for the profitable trader is that their position is closed involuntarily, potentially forfeiting some unrealized profits. Traders are typically ranked by profit and leverage, with the highest-ranked being deleveraged first.