Auto deleveraging (ADL) is a process used by futures exchanges to protect against the risk of default by a trader. When a trader is unable to meet their margin requirements, the exchange will automatically close out the trader's positions to cover the margin deficit. This process is known as auto deleveraging. Auto deleveraging works by liquidating the trader's positions in order of profitability, starting with the least profitable positions. This ensures that the exchange can cover the margin deficit and protect other traders from potential losses. The process of auto deleveraging can be beneficial to traders who are able to maintain their margin requirements, as it helps to reduce the risk of default by other traders. It also helps to ensure that the exchange remains financially sound and is able to continue to offer its services.
