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What is Auto-Deleveraging (ADL)?

What is Auto-Deleveraging (ADL)?

Auto-Deleveraging (ADL) is a risk control mechanism in perpetual futures trading. When the market experiences extreme volatility and liquidated positions cannot be fully executed due to insufficient liquidity—potentially leading to an over-loss risk—the platform will activate ADL to automatically close or reduce some opposing positions, thereby maintaining the overall risk stability of the system.

To put it simply: 👉 When the market cannot normally close positions, the system will force a reduction of some profitable positions to cover losses caused by over-loss situations.

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Why is ADL Needed?

In perpetual futures trading, if a user’s account ends up with negative equity after liquidation, NewCoin will prioritize using the Insurance Fund to cover the corresponding losses.

However, under extreme market conditions, if liquidation losses exceed the coverage capacity of the Insurance Fund, the system will activate the ADL mechanism to automatically reduce some users’ opposing positions. This prevents systemic risk from escalating and affecting normal trading for other users.

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Which Positions Are Prioritized for ADL?

ADL is not triggered randomly but follows specific risk-ranking rules, generally based on factors such as:

  • Leverage: Higher leverage carries greater risk.

  • Unrealized Profit/Loss Ratio: Higher profits are ranked higher.

  • Position Size: Larger positions have a greater impact on the system.

In summary: 👉 Positions with high leverage + high profit + large size have higher priority for ADL.

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What Happens When ADL Is Triggered?

If your position is selected for ADL, the following may occur:

  • The system will partially or fully close the position at a reasonable price (e.g., an index composite price).

  • No additional fees will be charged.

  • The closing operation is executed directly by the system and does not go through the order book.

  • This is a platform risk protection mechanism and is not due to user error or violation.

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How to Reduce the Risk of Being Selected for ADL?

You can lower the likelihood of your position being auto-deleveraged by:

  • Using reasonable leverage levels.

  • Controlling the size of individual positions.

  • Avoiding holding high-leverage, high-floating-profit positions during extreme market conditions.

  • Taking profits appropriately to prevent excessive unrealized gains that could rank high in ADL priority.

NewCoin Reminder: ADL is a last-resort risk management mechanism for extreme market scenarios and is rarely triggered. However, it cannot be entirely avoided. We recommend that you manage risk prudently in futures trading and avoid excessive use of leverage.

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