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Auto-deleveraging (ADL)

A last-resort mechanism in which an exchange forcibly reduces profitable positions to cover losses its insurance fund cannot.

When a liquidation fills so badly that the position's margin goes below zero and the insurance fund is exhausted, the exchange closes part of the most profitable, most leveraged positions on the opposite side to absorb the shortfall. ADL is rare and happens during extreme moves; it is the reason a winning position can be closed without the trader's action.

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