When both long and short positions face simultaneous force account liquidation, the platform does not prioritize loss allocation based on which side has bigger losses. The rule is: the insurance fund covers losses first, and only if it is exhausted will the platform use the highest-profit positions per ADL rules to cover the remaining gap. The core logic is: the deficit is first borne by the insurance fund, and automatic deleveraging (ADL) will only be activated after the fund is fully used up, forcing profit positions to close to make up for the remaining deficit.
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Core Process of Loss Allocation
Insurance Fund as First Backup
When extreme market volatility causes forced liquidation orders to fail to execute normally, or the executed price deviates far from the bankruptcy price, the resulting deficit will be covered by the insurance fund. Each futures contract usually has its own independent insurance fund pool. As long as the fund still has remaining balance, losses from simultaneous long and short liquidation will not be directly allocated to other profitable users.
Next Step: Automatic Deleveraging (ADL)
ADL will only be triggered when the insurance fund balance is completely exhausted and cannot cover further liquidation losses. At this time, the platform will sort all profitable positions by ADL priority score, and positions with higher scores will be forcibly closed first. The scoring formula is set by each platform, but it is generally calculated based on the position's profit level and leverage ratio.
According to Bybit's public mechanism, ADL may be triggered if the drawdown ratio of a single trading pair's insurance fund exceeds the set threshold (e.g. 30%), or the insurance fund balance of a certain trading pair drops to zero. Once triggered, the system will reassign remaining fund pools with available balance to offset losses.
ADL Selection and Sorting Rules
ADL does not pick positions randomly, the closing order is determined by a standardized ranking formula. The higher your position ranks, the more likely it is to be selected for forced closure. You can check your risk of being selected via the ADL indicator (1-5 bars) on your position panel: the more lit bars, the higher your ADL risk.
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Post-operation Verification Method
After extreme market conditions occur, if your position is still open, you can open the position panel on the futures trading page, and check the number of lit ADL indicator bars next to each of your profitable positions. If most bars are lit (especially 4-5 bars), it means you are at the front of the ADL queue, you may actively reduce leverage or partially take profits to lower the risk of being selected for ADL.
