Auto Deleverage Mechanism
What is Auto Deleverage?
When a position is taken over by the liquidation system and closed at a price worse than the bankruptcy price, the system uses the insurance fund to cover the negative balance caused by liquidation. If the insurance fund balance is insufficient, the system activates the auto deleverage system. It reduces the positions of traders holding the opposite direction positions based on their bankruptcy price, in the order determined by their profit and leverage ratio.
Auto deleverage ensures that users forced to liquidate do not lose more than their position margin. It also avoids the inflexibility of socialized loss distribution during settlement and is more user-friendly for low-risk traders.
Auto Deleverage Ranking Calculation
The auto deleverage queue is determined by profit and leverage.
The more profit you make and the more leverage you use, the more likely your position is to be automatically reduced. All positions are sorted from high to low for both long and short positions, calculated as follows:
Ranking = Profit Percentage × Position Opening Leverage (when "Profit Percentage 0")
Where
Position Opening Leverage = Leverage set at the time of opening. For multiple openings, a weighted average is used. The leverage after multiple openings is the sum of the values of multiple openings divided by the sum of the initial margins for these positions.
Profit Percentage = (Mark Value - Average Position Opening Value) / Initial Margin
Initial Margin = Position Opening Value / Opening Leverage
Position Notional Value = Position value calculated based on current mark price
Average Entry Value = Position value calculated based on average opening price
Auto Deleverage Queue
You can understand your priority in the auto deleverage queue through the following indicator lights.
The indicator has 5 levels, with each level lit indicating a 20% increase in your priority.
As shown, when all indicator lights are lit, it means your priority is in the top 20% of the auto deleverage queue. Therefore, when liquidation occurs, if the market situation leads to insufficient insurance funds to cover position losses, your position might be auto-deleveraged.
Traders can lower the risk of being auto-deleveraged by reducing leverage or closing some profitable positions based on their ranking in the queue.
If your position is auto-deleveraged, you will receive a notification from the system. At the same time, your unfilled orders will be canceled, and you can choose to reopen positions.
Start Your Futures Trading Now!
KuCoin Futures Guide:
Thank you for your support!
KuCoin Futures Team
Note: Users from restricted countries and regions cannot open futures trading.