Auto-deleveraging (ADL)
Auto-deleveraging (ADL) is the forced reduction of profitable traders' positions when the insurance fund cannot cover the loss from a liquidation on the opposite side.
How it works
Every liquidated futures position needs a counterparty. If a position cannot be closed in the market without a loss beyond its margin, and the insurance fund is not enough, the exchange closes part of the positions of traders on the opposite side at the liquidated trader's bankruptcy price.
Traders with the highest profit and leverage are first in line. Exchanges usually show an ADL queue indicator (bars or lights from 1 to 5). The higher your rank, the more likely your position will be reduced.
ADL is rare and mostly happens in extreme volatility or on illiquid contracts. There is usually no fee for it, but you lose the position just as it is paying, and you do not choose the price.
You are short at 25x with +150% profit in a falling market. A large long is liquidated with a shortfall, and the insurance fund cannot cover it. The exchange closes half of your short at that long's bankruptcy price. You keep the profit on that half, but it will not gain from any further drop.
The mistake is ignoring the ADL queue indicator while holding a highly profitable, high-leverage position during a crash on an illiquid coin. If the indicator is maxed out, consider taking partial profit or lowering leverage to drop down the queue.
Questions and answers
What is ADL in simple terms?
It is when the exchange force-closes part of profitable positions to cover liquidated traders' losses because the insurance fund ran short.
Why was my profitable position closed?
Most likely auto-deleveraging: you were high in the ADL queue because of large profit and leverage. Your order history usually shows the details.
How can I reduce ADL risk?
Use lower leverage, take partial profits and trade liquid contracts. Watch the ADL queue indicator in your position panel.
Related terms
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Updated: 2026-10-19