Auto Deleveraging

Phemex reduces the risk of socialized loss by automatically decreasing a trader’s leverage in case of a sharp price change. For instance, if your position is liquidated it will be taken over by our liquidation engine, but if the liquidation cannot be filled by the time the market price reaches your bankruptcy price, the Auto Deleveraging system (ADL) will automatically deleverage an opposing traders’ positions. The price at which a trader’s positions are closed out at equals the bankruptcy price of the initial liquidated order. Deleveraging priority is calculated by profit and leverage. More profitable and higher leveraged traders are deleveraged first.

Why is Auto deleveraging needed?

Auto deleveraging prevents the passing of losses onto our users.

When does auto deleveraging happen?

The insurance fund is used to address liquidation orders in the book. If, and only if, the proportion of the fund allocated to that contract is completely depleted, then ADL occurs. It is by nature a very rare event.

How can I avoid being auto-deleveraged?

Traders with high leverage have a lower liquidation threshold and end up losing a large portion of their initial margin. By trading with lower leverage, you may not experience deleveraging at all as your bankruptcy price would be equivalent to a lower spot price on your traded asset.

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Phemex, Trade Simple

Updated on March 30, 2020

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