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If you would like to know more details, please read the whole article below.
Here is our tutorial video: https://www.youtube.com/watch?v=Wx_9H6mwGZ8
Auto Deleveraging (ADL) system will automatically deleverage an opposing position when the position cannot be liquidated at a price that is better than the bankruptcy price and there is an insufficient insurance fund to cover the contract loss. The auto deleveraging system will force part of the profitable users to be liquidated to sustain the loss of bankruptcy users.
When the opposing order of selected trader happens ADL action, the latest trade price will be the price we execute the ADL for the selected trader. This will avoid the trade price not listing on the candlestick chart.
The opposing order of selected trader is forced to reduce two queues, one for long positions and one for short positions. The queues are sorted by the index of ADL to ranking and deleveraging.
The auto deleveraging ranking is derived in order of effective leverage use and highest profit. We use “Opposing Auto Deleveraging Index” to calculate the number of higher ADL of the trader and the opposing order of selected trader will be deleveraged first at the trade price.
Here is the formula:
Profitable scenario: Index = Revenue Percentage X Effective Leverage
Loss scenario: Index = Revenue Percentage X Effective Leverage
In this scenario,
Effective Leverage=abs(marked price)/(marked price-bankruptcy price)
Marked Price=The price position of marked price
Bankruptcy Price=The price position of bankruptcy price
Average opening price= The price position of opening price
Assuming that the system automatically deleverages an opposing position, the trader will receive the notification of liquidation. If the trader has unfilled orders, those will be canceled automatically. When the opposing order of selected traders liquidate, the ADL users can start to trade.
The ADL system could force you to liquidate all of your positions if you’re the opposing order of selected trader . In this scenario, we won’t charge any handling fee.
FAMEEX will try to avoid this scenario as much as possible, and minimize the impact of the ADL liquidation. Due to the high volatility of the cryptocurrency market and the high leverage of the contracts market, this situation may still occur.