Auto Deleveraging (ADL)
Auto deleveraging, usually shortened to ADL, is a mechanism used by some derivatives platforms to reduce or close positions held by other traders when losses from liquidated positions cannot be adequately absorbed through the platform's normal liquidation and insurance mechanisms.
Why it matters to you
A trader can be profitable and still potentially have part or all of a position reduced through ADL during extreme market conditions. This is why traders should understand not only their own liquidation risk but also how their exchange handles system wide losses.
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