Why Is Effective Leverage Used Instead of Nominal Leverage in the ADL Ranking?

Effective leverage is a more accurate measure of a trader's true risk exposure because it considers the unrealized profit or loss of the position. Nominal leverage only considers the initial margin and position size.

A highly profitable position, even with high nominal leverage, has a larger equity buffer, meaning lower effective leverage. ADL targets positions with the highest risk to the exchange, which is best represented by high effective leverage.