When Does Auto-Deleveraging (ADL) Occur?
Auto-Deleveraging (ADL) occurs only in an extremely narrow window: when a position is liquidated and the loss exceeds the margin (bankruptcy), and the insurance fund is depleted and unable to cover the shortfall, the system triggers this last resort. It does not deduct from the losing account; instead, it forcibly deleverages the opposite side's most profitable and highest-leverage positions, using their profits to fill the bankruptcy hole.
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The following breaks down the ADL trigger chain step by step, so you can determine whether you are in a risk zone.
Step 1: Check if Your Platform Displays ADL Risk Level Before Triggering
What to do: Locate the ADL risk indicator or ranking on your position trading interface.
How to do it:
Binance users: Below the position details, you can see a five-level light bar system. 0–1 green lights = low risk (bottom of the queue), 2 lights = moderate risk (pay attention), 3 yellow lights = higher risk (monitor closely), 4 orange lights = high risk (consider reducing leverage), 5 red lights = maximum risk (top 20%, likely to be ADLed first during extreme market conditions).
Bybit users: You can also view the ADL priority indicator on the position interface; the higher the position, the higher the ranking.
Other platforms: Search "[platform name] + ADL indicator" or check the risk parameters on the contract details page.
Completion criteria: You can see the ADL risk level (or ranking) of your current position, instead of "not knowing if you're in the queue".
Key reminder: The ADL risk level is dynamic and refreshes in real time as profits and leverage change. If you are in profit and using high leverage, your ranking could rise at any moment.
Step 2: Determine Whether Your Position Could Be an ADL Candidate
What to do: Examine the basis of your ADL ranking and assess your position in the "priority deleveraging" queue.
How to do it: The ADL ranking primarily looks at one metric—leveraged profit rate (or ADL score). The formula is: ADL score ≈ Profit percentage × Effective leverage.
Example: You are in profit 50% with 20x leverage, your ADL score is 1000 points. Another user is in profit 20% with 10x leverage, score is 200. You score much higher and will be selected first.
Completion criteria: You understand that "high profit + high leverage" are the key factors that put you at the front of the ADL queue, and you can roughly estimate your position's score.
Step 3: Check if the Platform's Insurance Fund Balance Is Near the Trigger Line
What to do: Understand the platform's ADL trigger conditions and determine whether the current market state satisfies ADL triggering criteria.
How to do it: Taking Bybit as an example, ADL trigger has two scenarios:
Condition 1: A single trading pair's drawdown over the past 8 hours reaches or exceeds a trigger threshold (e.g., 30%) of the insurance fund's highest balance during that period.
Condition 2: The total balance of multiple trading pairs sharing the insurance fund is less than or equal to 0.
Specific parameters can be found on each platform's ADL page (e.g., Bybit's "Auto-Deleveraging (ADL) tab").
Completion criteria: You know that "insurance fund depletion" is a prerequisite for ADL, and you can gauge the trigger probability based on the current market extremity—probability is higher during extreme one-sided moves.
Step 4: Assess Whether the System's Liquidation Engine Has Exhausted Normal Channels
What to do: Understand that ADL is the last step in the liquidation process, with several safeguards before it.
How to do it: The normal flow is:
The position is liquidated, and the system tries to match the closing order in the order book (Stage 1—market liquidity).
If liquidity is insufficient and the order cannot be fully filled, the insurance fund steps in to cover the loss.
If the insurance fund is also depleted, ADL is triggered.
Completion criteria: You can tell whether the current market shows signs of insufficient depth (e.g., widening spreads, thin order book) and whether the insurance fund has been heavily drained.
Step 5: Check How Your Position Would Be Affected After Triggering
What to do: Confirm the specific consequences you would face if ADL is triggered.
How to do it: The effects after ADL triggering include:
Your position will be partially or fully force-closed (at a quantity determined by the system).
The closing price is the bankruptcy price, not the current market price, which is usually worse for you.
All active pending orders are cancelled.
You will receive an email/App notification.
Completion criteria: You know that ADL is not "liquidation" but "forced deleveraging," and the price is usually unfavorable.
Prerequisites
Before performing the above checks, make sure you have enabled contract trading and have an open position. If you don't hold a position, ADL does not concern you—it only deleverages users with open positions.
Common Misconceptions
Many users mistakenly think ADL is "random selection" or "depends on luck." This is not true—the system has clear ranking rules; those with high profit and high leverage will definitely be prioritized. Another misconception is confusing ADL with "socialized loss" (clawback). ADL is an active mechanism, while clawback is a passive measure taken by platforms in extreme circumstances; the two are different.
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Risk Warning
Capital risk: ADL closes positions at the bankruptcy price, which is usually far worse than your expected take-profit price. You may be forced out when your profit is at its highest, and the actual credited profit may shrink significantly.
Account risk: After ADL, your position size is reduced, but the P&L is realized. You cannot choose whether to participate, nor can you "exit" the queue in advance—you can only lower your ranking by reducing leverage or partially closing your position.
Sign that you have completed this correctly: You can state your position's ADL risk level (e.g., number of lights or ranking position) and know how close you are to being "selected." Next step: If your ADL indicator shows red or high risk, consider lowering leverage or partially closing the position to leave the front of the queue. If the lights are green, you don't need to worry for now, but keep monitoring ranking changes when extreme market conditions arise.
