Difference between revisions of "Auto-deleveraging"
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== Auto-deleveraging in Crypto Futures Trading == | == [[Auto-deleveraging]] in [[[[Crypto]] [[[[Futures]] Trading]]]] == | ||
Auto-deleveraging (ADL) is a mechanism used in crypto futures trading to manage risk when a trader’s position is liquidated, and the liquidation engine cannot fully cover the loss. This process ensures that the exchange maintains balance by transferring the remaining loss to other traders with opposing positions. Understanding ADL is crucial for anyone involved in leveraged trading, as it directly impacts your trading strategy and risk management. | Auto-deleveraging (ADL) is a mechanism used in crypto futures trading to manage risk when a trader’s position is liquidated, and the liquidation engine cannot fully cover the loss. This process ensures that the exchange maintains balance by transferring the remaining loss to other traders with opposing positions. Understanding ADL is crucial for anyone involved in leveraged trading, as it directly impacts your trading strategy and risk management. | ||
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=== Example of Auto-deleveraging === | === Example of Auto-deleveraging === | ||
Let’s say Trader B has a long position on Bitcoin futures with 10x leverage, and Trader C has a short position with the same leverage. If Trader B’s position is liquidated and the liquidation engine cannot cover the entire loss, Trader C’s profitable short position may be auto-deleveraged. This means Trader C’s profits will be reduced to cover Trader B’s loss. | Let’s say Trader B has a long position on [[[[Bitcoin]] futures]] with 10x leverage, and Trader C has a short position with the same leverage. If Trader B’s position is liquidated and the liquidation engine cannot cover the entire loss, Trader C’s profitable short position may be auto-deleveraged. This means Trader C’s profits will be reduced to cover Trader B’s loss. | ||
=== Risk Management Tips for Beginners === | === Risk Management Tips for Beginners === | ||
Auto-deleveraging can be avoided with proper risk management. Here are some tips for beginners: | Auto-deleveraging can be avoided with proper risk management. Here are some tips for beginners: | ||
* **Use Lower Leverage**: High leverage increases the risk of liquidation and ADL. Start with lower leverage to minimize this risk. | * **Use Lower Leverage**: [[High leverage]] increases the risk of liquidation and ADL. Start with lower leverage to minimize this risk. | ||
* **Set Stop-Loss Orders**: Always use stop-loss orders to limit potential losses and avoid liquidation. | * **Set Stop-Loss Orders**: Always use stop-loss orders to limit potential losses and avoid liquidation. | ||
* **Monitor Your Margin**: Keep an eye on your margin balance to ensure it stays above the maintenance margin. | * **Monitor Your Margin**: Keep an eye on your margin balance to ensure it stays above the maintenance margin. | ||
* **Diversify Your Portfolio**: Avoid putting all your funds into a single trade. Diversification helps reduce overall risk. | * **Diversify Your Portfolio**: Avoid putting all your funds into a single trade. [[Diversification]] helps reduce overall risk. | ||
=== How to Get Started with Crypto Futures Trading === | === [[How to Get Started with [[Crypto Futures]] Trading]] === | ||
If you’re new to crypto futures trading, here’s a step-by-step guide to get started: | If you’re new to crypto futures trading, here’s a step-by-step guide to get started: | ||
1. **Choose a Reliable Exchange**: Platforms like [https://partner.bybit.com/b/16906 Bybit] and [https://accounts.binance.com/register?ref=Z56RU0SP Binance] offer user-friendly interfaces and robust trading tools. | 1. **Choose a Reliable [[Exchange]]**: Platforms like [https://partner.bybit.com/b/16906 Bybit] and [https://accounts.binance.com/register?ref=Z56RU0SP [[Binance]]] offer user-friendly interfaces and robust trading tools. | ||
2. **Create an Account**: Register on your chosen platform using the links above. | 2. **Create an Account**: Register on your chosen platform using the links above. | ||
3. **Learn the Basics**: Familiarize yourself with futures trading concepts like leverage, margin, and liquidation. | 3. **Learn the Basics**: Familiarize yourself with futures trading concepts like leverage, margin, and liquidation. | ||
4. **Start Small**: Begin with small trades to gain experience and confidence. | 4. **Start Small**: Begin with small trades to gain experience and confidence. | ||
5. **Use Demo Accounts**: Many platforms offer demo accounts to practice trading without risking real funds. | 5. **Use [[Demo Accounts]]**: Many platforms offer demo accounts to practice trading without risking real funds. | ||
=== Conclusion === | === Conclusion === | ||
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== Sign Up on Trusted Platforms == | == Sign Up on Trusted Platforms == | ||
* [https://accounts.binance.com/register?ref=Z56RU0SP Binance Registration] | * [https://accounts.binance.com/register?ref=Z56RU0SP [[Binance Registration]]] | ||
* [https://partner.bybit.com/b/16906 Bybit Registration] | * [https://partner.bybit.com/b/16906 [[Bybit Registration]]] | ||
* [https://bingx.com/invite/S1OAPL/ BingX Registration] | * [https://bingx.com/invite/S1OAPL/ BingX Registration] | ||
[https://buy.paybis.com/click?pid=26030&offer_id=1 The most profitable cryptocurrency exchange — buy/sell for euros, dollars, pounds — register here.] | [https://buy.paybis.com/click?pid=26030&offer_id=1 The most profitable cryptocurrency exchange — buy/sell for euros, dollars, pounds — register here.] | ||
=== Join Our Community === | === Join Our [[Community]] === | ||
Subscribe to our Telegram channel [https://t.me/cryptofuturestrading @cryptofuturestrading] for analytics, free signals, and much more! | Subscribe to our Telegram channel [https://t.me/cryptofuturestrading @cryptofuturestrading] for analytics, free signals, and much more! | ||
== Sponsored links == | |||
* [https://buy.paybis.com/MCfWIf Paybis (crypto exchanger)] — Buy/sell crypto via card or bank transfer. | |||
* [https://accounts.binance.com/register?ref=V2WQ1AZO Binance] — Exchange (spot/futures). | |||
* [https://partner.bybit.com/b/16906 Bybit] — Exchange (futures tools). | |||
* [https://bingx.com/invite/S1OAPL/ BingX] — Exchange and derivatives. | |||
* [https://partner.bitget.com/bg/7LQJVN Bitget] — Exchange (derivatives). | |||
[[Category:crypto futures trading]] | [[Category:crypto futures trading]] | ||
Latest revision as of 09:21, 7 January 2026
Auto-deleveraging in [[Crypto [[Futures Trading]]]]
Auto-deleveraging (ADL) is a mechanism used in crypto futures trading to manage risk when a trader’s position is liquidated, and the liquidation engine cannot fully cover the loss. This process ensures that the exchange maintains balance by transferring the remaining loss to other traders with opposing positions. Understanding ADL is crucial for anyone involved in leveraged trading, as it directly impacts your trading strategy and risk management.
What is Auto-deleveraging?
Auto-deleveraging occurs when a trader’s position is liquidated, but the liquidation process does not fully cover the loss. In such cases, the exchange uses the ADL system to allocate the remaining loss to traders with profitable positions in the opposite direction. ADL is a last-resort measure to ensure the stability of the trading platform.
For example, if Trader A has a long position and gets liquidated, the system will look for traders with short positions to cover the loss. These traders are selected based on their leverage and profitability.
How Does Auto-deleveraging Work?
The ADL process follows a specific order to allocate losses:
1. **Liquidation Engine**: When a trader’s margin balance falls below the maintenance margin, their position is liquidated. 2. **Partial Liquidation**: If the liquidation engine cannot fully cover the loss, the remaining loss is passed to the ADL system. 3. **ADL Ranking**: Traders with opposing positions are ranked based on their leverage and profitability. Those with higher leverage and profits are prioritized. 4. **Loss Allocation**: The remaining loss is allocated to these traders, reducing their profits or increasing their losses.
Example of Auto-deleveraging
Let’s say Trader B has a long position on [[Bitcoin futures]] with 10x leverage, and Trader C has a short position with the same leverage. If Trader B’s position is liquidated and the liquidation engine cannot cover the entire loss, Trader C’s profitable short position may be auto-deleveraged. This means Trader C’s profits will be reduced to cover Trader B’s loss.
Risk Management Tips for Beginners
Auto-deleveraging can be avoided with proper risk management. Here are some tips for beginners:
- **Use Lower Leverage**: High leverage increases the risk of liquidation and ADL. Start with lower leverage to minimize this risk.
- **Set Stop-Loss Orders**: Always use stop-loss orders to limit potential losses and avoid liquidation.
- **Monitor Your Margin**: Keep an eye on your margin balance to ensure it stays above the maintenance margin.
- **Diversify Your Portfolio**: Avoid putting all your funds into a single trade. Diversification helps reduce overall risk.
[[How to Get Started with Crypto Futures Trading]]
If you’re new to crypto futures trading, here’s a step-by-step guide to get started:
1. **Choose a Reliable Exchange**: Platforms like Bybit and Binance offer user-friendly interfaces and robust trading tools. 2. **Create an Account**: Register on your chosen platform using the links above. 3. **Learn the Basics**: Familiarize yourself with futures trading concepts like leverage, margin, and liquidation. 4. **Start Small**: Begin with small trades to gain experience and confidence. 5. **Use Demo Accounts**: Many platforms offer demo accounts to practice trading without risking real funds.
Conclusion
Auto-deleveraging is an essential concept to understand in crypto futures trading. By managing your leverage, setting stop-loss orders, and monitoring your margin, you can minimize the risk of liquidation and ADL. Start your trading journey on trusted platforms like Bybit and Binance, and always prioritize risk management to protect your investments. Happy trading!
Sign Up on Trusted Platforms
The most profitable cryptocurrency exchange — buy/sell for euros, dollars, pounds — register here.
Join Our Community
Subscribe to our Telegram channel @cryptofuturestrading for analytics, free signals, and much more!
Sponsored links
- Paybis (crypto exchanger) — Buy/sell crypto via card or bank transfer.
- Binance — Exchange (spot/futures).
- Bybit — Exchange (futures tools).
- BingX — Exchange and derivatives.
- Bitget — Exchange (derivatives).