Auto-Deleveraging (ADL)

Last updated: Feb 24, 2026

Auto-deleveraging is a last-resort risk mechanism that activates when a liquidated account reaches bankruptcy — meaning its collateral is insufficient to cover the loss at the current mark price. In this situation, the exchange cannot absorb the loss through normal liquidation, so it is instead distributed to the most profitable, most leveraged positions on the opposite side of the market.

ADL is rare. The normal liquidation process and the Wick Insurance system are designed to handle the vast majority of risk scenarios before ADL becomes necessary.

When does ADL trigger?

A standard liquidation closes a position at the mark price. The bankruptcy price is the mark price at which an account's equity would reach exactly zero:

bankruptcy_price = mark_price × (1 - account_equity / position_size_usd)

If the mark price moves beyond the bankruptcy price before the liquidation order fills — meaning the position is closed at a worse price than expected — the shortfall cannot be recovered from the liquidated account. This deficit is covered by auto-deleveraging counterparty positions.

How ADL works

When a bankruptcy event occurs on a given market and side (e.g. BTC long), the system reduces the positions of highly profitable, highly leveraged accounts on the opposite side (BTC short) to cover the loss.

Importantly: your position is reduced at the bankruptcy price of the failing account — not at the current mark price. If you are ADL'd while your position is in profit, you receive a below-market close price for the portion that is reduced.

ADL ranking

All open positions are continuously ranked by an ADL score. Positions with the highest scores are deleveraged first.

ADL score = P&L ratio × effective leverage
 
P&L ratio (long)  = (mark_price - entry_price) / entry_price
P&L ratio (short) = (entry_price - mark_price) / entry_price
 
effective_leverage = |position notional| / account equity

In plain terms: the score is highest for positions that are both deeply in profit and highly leveraged relative to their account equity.

Bucket system

Rankings are translated into 5 buckets:

Bucket	Risk	Description
5	Highest	First to be auto-deleveraged
4	High
3	Medium
2	Low
1	Lowest	Last to be auto-deleveraged

Buckets are assigned by percentile — if you are in bucket 5, your position is in the top 20% of ADL scores for that market and side. Rankings are recalculated continuously as mark prices and equity levels change.

How to reduce your ADL risk

Your ADL risk is only relevant when you have a profitable, leveraged position. An account that is losing money has an ADL score of zero and will not be ADL'd.

To lower your ADL score and bucket:

Take profits — realising gains reduces your P&L ratio back toward zero
Reduce leverage — lower effective leverage reduces your score even if P&L is high
Add collateral — increasing account equity reduces effective leverage and thus the ADL score