ADL (Auto-Deleveraging)

Auto-deleveraging (ADL) is a risk management system that automatically closes the positions of highly profitable traders against the positions of a bankrupt trader to ensure the system remains balanced. This occurs when the insurance fund is insufficient to cover the losses of a liquidated position.

By forcing the profitable trader to exit their position at the bankrupt trader's bankruptcy price, the system prevents a total collapse of the order book and eliminates the need for socialized losses. While it protects the platform, it introduces execution risk for profitable traders who may have their positions closed unexpectedly.

It is a critical feature in many cryptocurrency derivatives exchanges to manage extreme market volatility.