What is ADL (Auto-Deleveraging)
ADL (Auto-Deleveraging) is a risk control mechanism designed for extreme market conditions. When a position is forced into liquidation due to insufficient margin, but the market lacks sufficient depth to absorb the liquidation, the system will automatically deleverage opposing positions to complete the process. Specifically, the liquidated position is matched against opposing positions that are either profitable or have low maintenance margin ratios. This mechanism helps to minimize further losses to the platform’s insurance fund and limit the market impact of large forced liquidations. The core objective of ADL is to maintain market fairness and safeguard overall liquidity during periods of heightened volatility.
Gate prioritizes user trading safety and has implemented multiple risk control measures to minimize the likelihood of ADL being triggered. However, due to the high volatility and leveraged nature of the cryptocurrency market, the risk of ADL cannot be completely eliminated. The ADL mechanism is only activated when absolutely necessary and serves as a last-resort risk management tool. If a liquidated position’s losses can be absorbed by the market or covered by the insurance fund, Gate will take measures to avoid triggering ADL.
How ADL Works
- Ranking for Deleveraging: ADL ranks positions based on their return on investment (ROI) and maintenance margin ratio (MMR). The ADL ranking can be viewed through the signal light indicator on the trading interface.
- Deleveraging Process: When a position is selected for ADL, all its pending orders will be automatically canceled. The system will then forcibly match the position at the bankruptcy price. If the position is only partially reduced, the remaining contract size will decrease, and its ADL ranking will be lowered accordingly. Once the deleveraging process is completed, the user may freely open new positions in the market.
When ADL is Triggered
- A large number of positions are liquidated with losses, causing major contract losses to the platform.
- The insurance fund is insufficient to cover the losses.
How ADL Ranking is Calculated
For profitable positions: Ranking = ROI / MMR
For losing positions: Ranking = ROI × MMR
Positions with a Maintenance Margin Ratio (MMR) below 100% (i.e., already liquidated) are excluded from the ranking.
Note:
The ADL system prioritizes reducing profitable positions over losing ones. However, losing positions are still ranked and may also be subject to deleveraging.
How to Lower Your ADL Risk
The risk of ADL cannot be completely eliminated, but you can take the following steps to reduce the chance of your positions being auto-deleveraged.
Add margin: Increasing your margin raises your MMR, helping lower your ADL ranking.
Monitor the ADL Signal Light: The signal light indicates your position’s current ranking. There are 5 levels in total—the more lights are illuminated, the higher the risk of being auto-deleveraged (5 lights = highest risk; 1 light = lowest risk).
