Understanding Auto Deleveraging in Crypto Trading

Auto deleveraging, or ADL, is a risk management tool used by crypto exchanges to keep the market stable. It happens during extreme volatility when the exchange cannot find a buyer or seller to clear a bankrupt trader position. To prevent the entire platform from losing money, the system steps in to close the positions of other traders who are currently in profit.

Traders are usually ranked based on their profit and leverage levels. If you are holding a highly profitable trade with high leverage, you are more likely to be selected for an ADL event. This is the exchange way of ensuring that the insurance fund is not completely drained by bad debts.

If you want to avoid having your successful trades closed by the system, keep an eye on your risk exposure. You can often check your position ranking on your trading dashboard to see how close you are to the top of the queue. Keeping leverage at sensible levels is the best way to stay off the list during high market stress.