Binance ADL Ranks Profitable Positions by PnL % × Effective Leverage

When Binance auto-deleverages a profitable position, the cause sits on the other side of the trade. A losing position was liquidated and ended up bankrupt, the Futures Insurance Fund could not absorb it, and only then did the system pick positions from the profitable side, in ranking order, and close them to cover the loss the bankrupt position left behind. In the words of Binance's Help Center, "Auto-Deleveraging (ADL) is the final step in the liquidation process".

The front of the queue belongs to positions with both a high profit percentage and high effective leverage. The ranking value is PnL percentage multiplied by effective leverage, and the denominator of effective leverage is account balance plus unrealized profit. So of two positions showing the same percentage gain, the one with the thinner balance behind it ranks higher. If your turn comes, the position is closed at the bankruptcy price of the losing side's liquidation order, no trading fee is charged on that fill, and a notification goes out immediately with the amount liquidated and the liquidation price.

What has to happen before Binance Futures triggers ADL

A losing position reaches ADL in four steps. The sequence comes from two Binance Help Center pages, Introduction to Futures Insurance Funds and the ADL article:

1. The collateral a trader has posted to keep a position open falls below the margin needed to maintain it, and the position is liquidated.
2. If the position's asset balance is below zero after liquidation, or the position cannot be liquidated, it is treated as a Bankrupt Position.
3. The Futures Insurance Funds take over Bankrupt Positions as far as possible. The relevant fund bears any loss from a Bankrupt Position; if the position produces a profit, the profit is credited to that fund.
4. When the fund can't absorb the position, ADL starts. That means one of two things: the unrealized loss on Bankrupt Positions taken over by the liquidation engine is larger than the available balance of the fund allocated to that type of contract, or the Bankrupt Positions have reached the limit of the fund's Maximum Takeover Capacity.

Maximum Takeover Capacity is a multiple of the fund's current balance. Binance sets the multiple in advance and keeps it confidential. With a balance of $1 million and a multiple of 3x, to use the help page's example, the Maximum Takeover Capacity is $3 million. Once that limit is reached, the matching engine starts ADL: Binance liquidates the bankrupt trader's positions and selects opposing users in order of leverage and profitability, whose positions are then automatically liquidated to cover the loss.

Despite the word insurance in the name, a Futures Insurance Fund is not an insurance product, and Binance says so in writing. It covers only the difference between the bankruptcy price and the execution price of the liquidation order, and traders will not get any of their losses back from it. The fund's required minimum size is based on a 99.9% confidence interval and historical stress scenarios. The same help page adds that "the 99.9% confidence interval is not related to the occurrence of ADL and does not mean that ADL will be, or is expected to be, avoided in 99.9% of liquidation scenarios."

Why coin-margined contracts are more likely to be subject to ADL than USD-margined ones

Coin-margined contracts are more likely to be subject to ADL than USD-margined contracts (those margined in USDT or USDC), and Binance's ADL article states as much. The reason is the way the funds are divided. Coin-margined contracts collateralized with the same cryptocurrency share a single Futures Insurance Fund (BTC-margined perpetual and delivery contracts draw on the same one, for example), so that fund tends to be small. On the USD-margined side, contracts are grouped:

Binance may move contracts between funds and set up new fund accounts from time to time, as it sees fit. The last section shows where to look up which fund your own contract belongs to and how much it holds.

How Binance calculates ADL ranking from PnL percentage and effective leverage

The full set of formulas sits at the bottom of the ADL article, under Calculation for Liquidation Priority Ranking. They draw on a position's notional value (Position Notional) and the account balance (Account Balance, which the Chinese-language page in the screenshot below labels wallet balance):

PNL Percentage = Unrealized Profit/abs (Position Notional)
Effective Leverage = abs(Position Notional) / (Account Balance + Unrealized Profit)
If PNL Percentage ≥ 0, then ranking = PNL Percentage * Effective Leverage
If PNL Percentage < 0, then ranking = PNL Percentage / Effective Leverage
Leverage PNL Quantile = rank (user.ranking) / Total User Count
* For Portfolio Margin, Effective Leverage = abs (Position Notional) / accountEquity

These quantities are not all measured at the same level. PnL percentage and notional value are calculated per futures trading pair, one figure for each pair; account balance and unrealized profit are calculated across the whole account. With a BTCUSDT position and an ETHUSDT position open at once, each has its own PnL percentage, but the denominator of effective leverage is the same account-wide total for both.

For Portfolio Margin accounts, the denominator is account equity instead.

Effective leverage is recalculated from this formula, and it is a different number from the leverage multiple you chose when placing the order. With 20x selected on the order and a large unused balance still sitting in the account, the formula returns an effective leverage far below 20.

When PnL percentage is below zero, the formula switches from multiplication to division. The body of the page, though, deals with the profitable futures positions of winning traders, and it gives their order in one sentence: "Positions that are more profitable and more highly leveraged will be queued for ADL liquidation first, ahead of positions that are less profitable and less leveraged." The final line, the leverage PnL quantile, sets your rank against all users to give a relative position.

A 2% gain at 5x vs 20x effective leverage: how far apart do they rank?

Two made-up accounts, A and B, show the gap. Each holds a single BTCUSDT long with a notional value of 10,000 USDT and an unrealized profit of 200 USDT; only the account balance differs. With one position per account, the account-level balance and profit are simply that position's.

The PnL percentage is identical, yet B's ranking value is four times A's (0.4 ÷ 0.1 = 4), which puts B ahead of A in the queue. Both have made exactly the same amount of money; the only difference is the thinner balance backing B's position.

Two inputs in the formula would move B's ranking value. With 1,500 USDT more in the account balance, the denominator would be 1,800 + 200 = 2,000, effective leverage would be 5, the same as A's, and the ranking value would be 0.1. With a smaller notional value and the PnL percentage unchanged, effective leverage would be lower, and the ranking value lower with it. In both cases the position only sits further back. It is still in the queue, and being further back is not the same as being safe from deleveraging.

The account-level denominator also pulls other positions into the calculation. Suppose A's account holds an ETHUSDT position as well, showing an unrealized loss of 300 USDT. Unrealized profit across the account then totals 200 − 300 = −100, and the denominator becomes 1,800 − 100 = 1,700. Effective leverage on the BTCUSDT position rises from 5 to 10,000 ÷ 1,700 ≈ 5.88, and its ranking value goes from 0.1 to 2% × 5.88 ≈ 0.118. Nothing about the BTC position itself has changed; the floating loss on the other position pushed it forward.

At what price is an auto-deleveraged position closed, and is there a trading fee?

Once a profitable position is auto-deleveraged, three things follow, all set out on Binance's ADL page:

• The affected trader is notified immediately, and the notice states the amount liquidated and the liquidation price.
• The profitable position is closed at the bankruptcy price of the liquidation order on the side being liquidated.
• The trader whose profitable position is auto-deleveraged pays no trading fee on that fill.

The bankruptcy price is the limit price at which the liquidation order is executed: the price at which the losing side's loss exactly equals the value of the collateral they deposited, or their initial margin, and their margin balance reaches zero. One caveat comes attached to that definition: the bankruptcy price may fall outside the contract's market price range.

The liquidation price is the price at which the losing position starts to be liquidated. Binance says it may be influenced by several factors, including the leverage used, the maintenance margin rate, the price of the token at the time and the remaining balance of the losing trader's account. How the maintenance margin rate steps up with position size is easiest to see in a risk limit tier table; the estimate itself is covered in how a liquidation price is computed.

After an ADL notice arrives, check the amount and price in it against your positions and trade history to see how much was closed and how large the remaining position is. The remaining position's notional value and the account balance have both changed, so effective leverage has to be re-estimated from the new numbers.

Where to find the ADL indicator and the insurance fund balance

Every futures position carries an ADL indicator in the position interface that shows how likely that position is to be auto-deleveraged; when a position is about to face ADL, the indicator makes that plain. Binance strongly recommends that traders watch it closely. For the indicator itself the page offers only a sample image, and its written part is about the ranking formulas above, so alongside watching the indicator it helps to run your own PnL percentage and effective leverage through the formulas for a firmer sense of where you stand.

Futures Insurance Fund balances are on the futures trading interface: open the data menu, go to the futures data section and choose the insurance fund entry to see the balance of every contract's fund, denominated in USDT or USDC. The help page also links straight to the insurance fund page. With the balances in front of you, go back to the grouping table above and confirm which fund your contract uses.

Because the takeover multiple is confidential, the balance shows how the fund's size is changing but can't be converted into a distance from ADL. The indicator and the ranking formulas are the more direct reference.

Binance offers features such as Immediate-or-Cancel (IOC) limit orders to keep the potential impact of auto-deleveraging as small as possible. The same passage concedes that, given the volatility in the crypto markets and the high leverage offered to users, "it is not possible to completely avoid ADL liquidations".

Frequently asked questions

Can positions in a Delta Neutral Account still be auto-deleveraged?

On the Delta Neutral Account, Binance's ADL page speaks only to position in the ranking: for users who activate a Delta Neutral Account and meet the Delta Neutral threshold (relative_diff), hedged positions rank further back for ADL than those of other accounts. Further back is still in the queue. Binance has a separate Help Center article on the account type, What is Delta Neutral Account, and the ADL page refers readers to it for more details.

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