When trading cryptocurrency contracts, Binance provides an auto-deleveraging (ADL) indicator—commonly visualized as "lights" or horizontal red bars—to alert users about potential forced position reductions. This guide explains its purpose, logic, and practical implications.
What Triggers the ADL Indicator?
The ADL system activates when:
- Opposing positions risk liquidation: If counterparties (those holding opposite trades) approach insolvency, Binance may forcibly close profitable positions to prevent system-wide losses ("socialized loss").
- High leverage or excessive profits: Traders using high leverage or accumulating significant unrealized profits are prioritized for ADL to mitigate exchange risk.
How ADL Priority Works
Binance uses a tiered ranking system based on:
- Profitability: Positions with higher profit percentages are closed first.
- Leverage: Higher-leverage trades face earlier ADL.
- Position size: Larger orders may be partially reduced.
Example: A 10x leveraged long position with 50% profit will be ADL'd before a 5x leveraged position at 30% profit.
Should You Close Your Position Manually?
Pros of Active Management:
- Avoid unexpected closures during volatile moves.
- Reset ADL priority by reopening (via
vaudi600's suggestion).
Cons:
- Losing favorable entry points (noted by
ryanone). - Additional trading fees.
👉 Learn advanced ADL avoidance strategies
FAQs
1. Why are all my ADL lights red?
It signals your position meets multiple ADL criteria (e.g., high profit + leverage). The more bars lit, the higher your closure priority.
2. Can ADL trigger partial position closures?
Yes. Binance may reduce your position size (ppppp367 confirms this).
3. Does ADL mean I lose profits?
No—you keep realized profits up to the closure point, but future gains are capped.
4. How often does ADL occur?
Rarely, typically during extreme volatility or low liquidity.
5. Can I disable ADL?
No. It’s a forced mechanism to protect the exchange ecosystem.
Key Takeaways
- ADL protects exchanges from insolvency but limits trader profits.
- Monitor ADL indicators and adjust leverage/position sizes preemptively.
- Reopening positions resets ADL ranking but incurs fees.
👉 Explore low-ADL trading alternatives
Always prioritize risk management in volatile markets.
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