Most futures traders expect one thing when a position is liquidated: the position is closed, and the loss ends there.

In most situations, that’s exactly what happens.

However, during periods of extreme market movement, a liquidated position may leave a deficit because it cannot be closed at or above its bankruptcy price. When this happens, the liquidation process alone may not be sufficient to absorb the remaining loss.

XT uses multiple layers of risk management to handle these situations. The Insurance Fund acts as the first line of protection. If the remaining deficit cannot be fully covered and the Insurance Fund is being depleted faster than the platform’s predefined threshold, XT may activate its Auto-Deleveraging (ADL) mechanism.

ADL is designed to help maintain market stability and support orderly trading during exceptional market conditions.

What Is Auto-Deleveraging?

Auto-Deleveraging is a mechanism used in perpetual futures trading to reduce opposing positions after certain liquidation and Insurance Fund conditions have been met.

When ADL is activated, XT does not continue relying solely on orders placed through the market. Instead, the system ranks eligible positions on the opposing side according to XT’s published methodology.

The highest-ranked position may then be reduced or closed at the applicable mark price to offset the deficit.

ADL is different from forced liquidation. Forced liquidation applies to a position that no longer meets the required maintenance-margin conditions. ADL may affect a position on the opposite side, even when that position is profitable and has sufficient margin.

When Can ADL Be Triggered?

ADL is not triggered simply because a position has been liquidated. Rapid price movements, large liquidation events, and limited liquidity can make it difficult to close a liquidation near its bankruptcy price. ADL may become necessary only after the standard process is no longer sufficient.

How Does the ADL Process Work?

XT’s ADL process follows a defined sequence:

Step	What Happens
1	A position reaches the forced-liquidation condition.
2	The liquidation cannot be completed at or above its bankruptcy price.
3	A remaining deficit is created.
4	The Insurance Fund absorbs the loss according to XT’s rules.
5	If the fund is being depleted faster than the predefined threshold, ADL may be triggered.
6	Eligible opposing positions are ranked using PnL% and effective leverage.
7	The highest-ranked position is reduced or closed at the applicable mark price.

ADL is therefore considered a last-resort mechanism, not part of the normal outcome of every liquidation.

How Does XT Determine ADL Priority?

ADL does not select positions randomly. XT ranks positions on the opposing side using two main factors:

• Profit and Loss Rate (PnL%)
• Effective Leverage

For profitable positions, XT applies the following ranking logic:

ADL Rank = Profit Percentage × Effective Leverage

A position with both a high unrealized profit percentage and high effective leverage will generally receive a higher position in the ADL queue.

For unprofitable positions, the ranking is calculated differently:

ADL Rank = Profit Percentage ÷ Effective Leverage

Losing positions on the opposing side may still face ADL risk. However, because their returns are negative, the system generally prioritizes profitable positions.

Effective leverage is not necessarily the same as the leverage multiple selected when opening the trade. It is calculated from the position’s current mark value and bankruptcy value, with the trading system performing the calculation automatically.

What Happens if Your Position Is Selected?

If your position is selected, all or part of it may be reduced according to the amount required by the system.

The transaction is executed using the applicable mark price rather than waiting for an order to be matched through the order book. The resulting profit from the affected portion is added to the account balance according to XT’s rules.

A profitable position can therefore be reduced even though it has not reached its own liquidation condition. Selection occurs because the position ranks highly after the broader ADL trigger conditions have been met—not because the trader violated a rule.

How to Read the ADL Indicator

XT provides an ADL Indicator in the Current Positions section of the futures trading interface.

The indicator displays relative queue priority using five visual levels, each representing approximately 20% of the ranking range:

• Fewer illuminated levels indicate lower relative priority.
• More illuminated levels indicate higher relative priority.
• Most or all levels illuminated indicate the highest-priority tier.

If you hold multiple positions for the same contract, the interface may display the priority associated with the highest-ranked position.

A high indicator level does not mean ADL will definitely occur. It shows where your position is ranked if ADL is triggered for that contract. The indicator may change as profit, effective leverage, and market conditions change.

ADL vs. Forced Liquidation

Although they are sometimes confused, ADL and forced liquidation serve different purposes.

Feature	Auto-Deleveraging	Forced Liquidation
Trigger	Liquidation deficit and Insurance Fund depletion conditions	Margin ratio reaches the maintenance-margin condition
Who Is Affected	Ranked positions on the opposing side	Position with insufficient margin
Purpose	Manage deficits remaining after standard liquidation procedures	Prevent further losses from an undercollateralized position
Position Impact	Position may be reduced or closed	Position is liquidated according to platform rules
User Indicator	ADL Indicator	Liquidation price and margin ratio

This distinction explains why a profitable position with sufficient margin can still appear in the ADL queue.

Are Coin-Margined Contracts More Susceptible to ADL?

Coin-Margined contracts are generally more susceptible to ADL than USDT-Margined contracts.

Coin-Margined contracts denominated in the same cryptocurrency share a common Insurance Fund, which may be smaller in scale. By comparison, Insurance Fund pools for USDT-Margined contracts are maintained independently by contract.

This does not mean ADL will necessarily occur. It means the Insurance Fund structure may make Coin-Margined contracts relatively more susceptible under exceptional conditions.

How Can You Reduce Your ADL Exposure?

No action can guarantee that a position will never be affected by ADL. However, XT recommends several measures that may help manage exposure:

• Use lower leverage where appropriate. Higher effective leverage can increase ADL priority.
• Take profits periodically. Partially closing a profitable position may reduce its unrealized PnL percentage.
• Maintain sufficient margin. Additional margin can reduce forced-liquidation risk and may affect effective leverage.
• Monitor the ADL Indicator. A rising indicator shows that the position is moving into a higher relative priority tier.
• Watch market conditions. ADL risk may become more relevant during sharp price movements and large liquidation events.

These measures may reduce a position’s ranking, but they cannot eliminate ADL risk.

Final Thoughts

Auto-Deleveraging is an additional safeguard used when a liquidation leaves a deficit and the Insurance Fund is being depleted faster than XT’s predefined threshold.

Understanding the trigger, ranking methodology, mark-price execution, and ADL Indicator can help you better interpret your exposure during exceptional market conditions.

Always review the latest XT product documentation and applicable terms before trading, as platform rules and features may change.

Frequently Asked Questions

Does ADL happen during every liquidation?

No. ADL may be triggered only after a liquidation cannot be completed at or above its bankruptcy price and the applicable Insurance Fund conditions have been met.

Can a profitable position be affected?

Yes. Profitable positions on the opposing side may receive higher priority when they also have high effective leverage.

Does a high ADL Indicator mean my position will be reduced?

Not necessarily. The indicator shows relative queue priority if ADL is triggered. It does not mean an ADL event will occur.

At what price is an ADL transaction executed?

XT’s documentation states that the selected opposing position is transacted using the applicable mark price at the time of ADL.

About XT Exchange

Founded in 2018, XT Exchange is a leading global digital asset trading platform, serving over 12 million registered users across more than 200 countries and regions, with an ecosystem reach exceeding 40 million. XT Exchange supports 1,300+ tokens and 1,300+ trading pairs, offering a wide range of trading options, including spot, margin, and futures, alongside a secure RWA (Real World Assets) marketplace. Guided by the vision “Xplore Crypto, Trade with Trust,” the platform strives to provide a secure, trusted, and intuitive trading experience.

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Risk Disclosure

Trading digital-asset derivatives involves significant risk, including the potential loss of your entire investment. Product availability, eligibility requirements, and platform rules may vary by region and change over time. Always review the applicable documentation, terms, and risk disclosures before trading futures.