BETAWEB3

Auto-Deleveraging (ADL)

Auto-Deleveraging (ADL) is a risk management mechanism used within The True Trade perpetual trading infrastructure during extreme market conditions when a liquidated position cannot be fully closed through the normal liquidation process.

ADL acts as a last-resort system protection mechanism designed to maintain platform solvency and market stability.

How ADL Works

When a position is liquidated, the TTT liquidation engine attempts to close the position on the market automatically.

In rare situations involving:

  • Extreme volatility;
  • Rapid price movement;
  • Insufficient market liquidity;

the liquidation engine may not be able to fully close the position without creating negative account equity.

If:

  • The Insurance Fund becomes insufficient;
  • The market cannot absorb the liquidation exposure;
  • The position cannot be safely closed through standard liquidation;

the ADL system may automatically reduce opposing traders’ positions to offset remaining system exposure.

Which Positions May Be Affected?

The ADL system generally prioritizes positions based on:

  • Profitability;
  • Effective leverage;
  • Overall risk exposure.

Highly profitable and highly leveraged opposing positions are generally prioritized first within the ADL queue.

Example:

  • A large Long position is liquidated during a sharp market decline;
  • The liquidation engine cannot fully close the exposure;
  • Opposing profitable Short positions may be partially reduced automatically through ADL.

Important Notes

  • ADL is not a normal position-closing mechanism;
  • ADL only activates during extreme market stress conditions;
  • Most liquidations are fully handled through the standard liquidation engine and Insurance Fund infrastructure.