Futures Trading

Auto-Deleveraging (ADL)

Last updated: 12/31/2025

1. What Is Auto-Deleveraging (ADL)?

In futures trading, users can open positions with leverage by posting only an initial margin, thereby amplifying both potential profits and losses. This is a core feature that makes the futures market attractive, but it also means that highly leveraged positions may incur rapid losses during volatile market conditions and may even result in negative account balances.
When a position is taken over by the liquidation engine and closed at a price worse than its bankruptcy price, the insurance fund is used to cover the resulting deficit. If the insurance fund is insufficient, the Auto-Deleveraging (ADL) system is triggered.
Under ADL, the system reduces positions held by traders on the opposite side of the liquidated position, starting with those that have the highest profits and highest leverage. The reduction is executed at the bankruptcy price of the liquidated position.

 

2. ADL Trigger Conditions

When a position is taken over by the liquidation engine and closed at a price worse than its bankruptcy price, the insurance fund of the corresponding trading pair is used to cover the deficit. If the insurance fund is insufficient, the Auto-Deleveraging (ADL) system will be activated.
 
Example: ADL Settlement Price( BTCUSDTM long position is liquidated)
  • Case 1: A short position opened at 100,000 is currently in profit. If ADL is triggered, it will be closed at the bankruptcy price of 88,000 against the liquidated long position, potentially resulting in additional profit.
  • Case 2: A short position opened at 88,900 is currently in loss. If ADL is triggered, it will also be settled at 88,000, which may turn from loss to profit.
  • Case 3 (Extreme scenario, severe deficit): A short position opened at 87,000 with the current price dipping to 86,000 shows profit. If ADL is triggered, it is still settled at 88,000, which may turn from profit to loss.
  • Note:All ADL reductions are settled at the bankruptcy price of the liquidated position, regardless of the current mark price. Even profitable positions may incur losses due to ADL settlement.

 

3. ADL Termination Conditions

ADL execution is not unlimited. It will stop immediately when any of the following conditions is met:
  • The deficit is fully covered The profits or losses generated from counterparty position reductions are sufficient to offset the bankruptcy loss, and the system stops further deleveraging.
  • The platform injects additional funds when necessary The insurance fund will uniformly assume the risk and cover potential bankruptcy losses to ensure market stability and protect user interests.

 

4. ADL Ranking Logic

The Auto-Deleveraging (ADL) sequence determines the order in which positions are forcefully liquidated, based on the Position Return Rate and Effective Leverage.Please note that for cross-margin dual-side positions, calculations are based on the net position direction and size.
  • For profitable positions: ADL Score = Position Return Rate × Effective Leverage
  • For losing positions: ADL Score = Position Return Rate ÷ Effective Leverage
Where:
  • Position Return Rate = Unrealized PnL of the contract ÷ Average Entry Value of the contract
  • Effective Leverage = Position Value ÷ Effective Margin
  • The Position Value is calculated based on the Mark Price
  • Isolated Effective Margin = Isolated Position Margin + Unrealized Profit
  • Cross Effective Margin = Cross Margin Balance
In profitable positions, a higher ADL Score indicates higher priority in the deleveraging sequence. In losing positions, a smaller absolute ADL Score indicates higher priority in the deleveraging sequence.
 
ADL Ranking Example
Assume there are three profitable long positions in the market:
Position Position Profit Rate Effective Leverage ADL Score Ranking
A 200% 20x 200% × 20 = 4000 1
B 150% 10x 150% × 10 = 1500 2
C 100% 5x 100% × 5 = 500 3
If a bankrupt short position requires ADL of 50 contracts, the system will first reduce 50 contracts from Position A.

Execution Logic

  1. All open orders of the selected position are automatically canceled
  2. The system matches the profitable position against the bankrupt position at the bankruptcy price to reduce the position
  3. Any remaining positions re-enter the ADL ranking queue

 

5. Understanding Your ADL Queue Position

The indicator shows your position in the Auto-Deleveraging (ADL) queue.
The indicator consists of five levels, and each illuminated level represents a 20% increase in priority.
ADL.png
When all five levels are lit, your position ranks within the top 20% of the ADL queue. This means that if a liquidation event occurs and the insurance fund is unable to fully cover the loss, your position may be subject to auto-deleveraging.
To reduce the risk of being auto-deleveraged, traders may lower leverage or partially close profitable positions based on their ADL queue ranking.
If your position is auto-deleveraged, the system will notify you. All open orders will also be automatically canceled, and you may choose to reopen positions afterward.

 

6. User Risk Disclosure

While ADL cannot be completely avoided, users can reduce the likelihood of their positions being auto-deleveraged by:
  • Monitoring the ADL indicator Track your position in the ADL queue and adjust positions promptly based on the indicator.
  • Adding margin Increasing maintenance margin reduces your ADL ranking priority and lowers the probability of auto-deleveraging.
  • Reducing effective leverage
Market conditions are inherently uncertain. Users employing hedging or market-neutral strategies should pay particular attention to the potential impact of ADL. Once triggered, ADL may automatically reduce part of a position, altering the overall risk exposure of the portfolio.
Users are advised to continuously monitor ADL indicators and position changes, and to adjust strategies and margin levels accordingly to maintain effective risk management.
After ADL execution, the system typically sends a notification. However, under extreme market conditions or special circumstances, notification delays may occur. Please note that notification delays do not affect the actual execution of ADL. Users should actively monitor their accounts and positions on the platform.

 

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Thank you for your support!

The KuCoin Futures Team

 

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