Liquidation and Auto-Deleveraging

Liquidation

Liquidation happens when your position no longer has enough margin to cover potential losses. At that point, the system automatically closes your trade to prevent your balance from going negative.How it works:

• Each position has a liquidation price shown when you open it.

• If the market price reaches that level, your margin is used up and the position is closed.

• The higher the leverage, the closer your liquidation price is to your entry.

Example:Y ou long ETH at $3,500 with 10x leverage. If ETH drops to around $3,150, your position may be liquidated. You lose your margin for that trade.

Risk tip: Using lower leverage and setting stop-loss orders helps reduce liquidation risk.

---

Auto-Deleveraging (ADL)

In extreme situations, if liquidations cannot be filled on the open market and the insurance fund is not enough to cover losses, Auto-Deleveraging (ADL) may occur.

• ADL reduces or closes positions of traders on the opposite side of the market (for example, profitable longs can be partially reduced to cover failing shorts).

• ADL is rare but possible during periods of very high volatility or sudden market crashes.

• On some platforms traders see an ADL indicator showing their risk of being auto-deleveraged. In Blum, this indicator is not available yet.

Risk tip: Keeping reasonable leverage, trading highly liquid pairs, and avoiding oversized positions helps minimize ADL exposure.