A whale trader is defined as one who is holding a large position with 100x leverage and is speculating for an uptrend market. In the situation of market retracement, his position is liquidated. The contract loss would be any extra loss that his initial margin could not cover.
To cover the loss, the system automatically deleverages the opposing traders’ positions by profit and leverage priority. This means that the chances of getting an auto-deleveraged increase if a trader has a more profitable position with high effective leverage.
ADL Priority Deleveraging Ranking
At all times, your position in the queue is shown by an indicator. This indicator represents your priority in the queue:
In the above example, all “lights” are lit, which would mean you are in the top position. In the case of a liquidation that is not able to be caught in the market, you may be deleveraged.
Priority Ranking Calculation
Deleveraging priority is calculated by profit and leverage. More profitable and higher leveraged traders are deleveraged first.
The ranking calculation is as follows:
Ranking = PNL Percentage x Effective Leverage (if PNL percentage > 0)
Ranking = PNL Percentage / Effective Leverage (if PNL percentage < 0)
Where
Effective Leverage =
abs(Mark Value) / Available Balance
PNL Percentage =
(Mark Value - Avg Entry Value) / abs(Avg Entry Value)
Mark Value =
Position Value at Mark Price
Avg. Entry Value =
Avg. entry price of positions with the same direction as the net position.
*The system splits these positions by buying and selling and ranks the positions from highest to lowest.
For example, a trader buys 3,000 contracts of BTCUSDT at USDT 8,000. Lets assume his available balance is 0 when the selling price reaches USDT 7,700 and a bankruptcy selling price at USDT 7,500.
When the mark price hits his liquidation price, his 3,000 contracts are forcefully liquidated. However, the current selling price on Tokenomy is USDT 7,300, which is much lower than his bankruptcy price. As there is an insufficient balance in the insurance fund to cover the contract loss, the ADL system will take over the liquidation process. There are 6 sell positions on the exchange.
| Traders with existing short positions | The quantity of selling contracts | Ranking = P&L x Percentage x Effective Leverage | Percentile |
|---|---|---|---|
| Trader A | 2500 | 5 | 20% (5light) |
| Trader B | 5500 | 6 | 20% (4light) |
| Trader C | 2000 | 4 | 60% (3light) |
| Trader D | 3000 | 3 | 60% (3light) |
| Trader E | 2000 | 2 | 80% (2light) |
| Trader F | 5000 | 1 | 100% (1light) |
Looking at the table, we can see that Trader A has the highest ADL ranking. He will be selected to cover the 3,000 contracts’ loss at a USDT 7,500 bankruptcy selling price and his position will remain 2500 contracts (5500-3000). Trader A’s 2,500 remaining contracts will stay open, and he will be auto-deleveraged. After this, the ADL ranking of trader A may not be at the top anymore.
Similarly, If there were 10,000 contracts’ worth of loss, then Trader A, B, and C will all be selected. They will receive an email alert and have all their BTC/USDT active orders closed. After which, they are free to re-enter the market.