Detailed Explanation
Why It Matters:
Prevents exchange insolvency in extreme volatility; affects high-leverage traders in crowded trades.
How It Works:
Ranked by leverage/profit; in liquidation cascade, ADL closes opposing profitable positions to fund bankrupt ones.
Common Mistakes:
Ignoring ADL queue (visible on platforms); over-leveraging in volatile assets.
FAQs
How to avoid?
Lower leverage, watch queue indicator.
Only futures?
Yes, primarily perps/futures.
