When the insurance fund is not enough: how KCEX decides whose winning position gets auto-deleveraged (the ranking formula, explained)

Most traders think the only way the exchange closes your position is liquidation. On KCEX there is a second way, and it targets the opposite kind of trader: Auto-Deleveraging (ADL) picks positions that are in profit and running high leverage. It is rare and only shows up in extreme moves, but it is worth knowing how the queue is built.

The image is a real KCEX futures screen from KCEX's own futures trading guide: the Open Position panel for a BTCUSDT 20X isolated long. It shows position 1,403.8947 USDT, margin 71.0169 USDT, margin ratio 9.20%, average entry 72,116.7, mark price 71,918.5, estimated liquidation price 68,797.6, and unrealized PnL of -3.8649 USDT (-5.44%). Those are KCEX's capture values from an older screenshot, not live prices.

How ADL gets triggered, step by step

1. A trader's position is liquidated and the system takes it over at the bankruptcy price.
2. Price keeps moving so fast that the system cannot close it at that price on the order book.
3. KCEX's insurance fund steps in to cover it.
4. If the book keeps deteriorating and the position still cannot be closed at the new bankruptcy price, ADL fires.
5. The system finds the opposite-side accounts with the highest ranking and closes part or all of their positions against the bankrupt one, at the bankruptcy price. No manual step.

So if you are long and winning big while shorts are being wiped out, you are the counterparty ADL looks at, and vice versa.

The ranking formula KCEX publishes

• If the position is profitable: Ranking Score = Profit Percentage x Effective Leverage
• If the position is losing: Ranking Score = Profit Percentage / Effective Leverage

Where:

• Profit Percentage = (Position Value - Average Entry Value) / Average Entry Value
• Effective Leverage = Position Value / (Position Value - Bankruptcy Value)
• Position Value is the position valued at the mark price, Bankruptcy Value at the bankruptcy price, Average Entry Value at your average entry

Higher score = closer to the front of the ADL queue.

Reading the screenshot with that formula

For the long in the image: (71,918.5 - 72,116.7) / 72,116.7 = about -0.27%. A negative profit percentage gets divided by effective leverage, so the score stays negative. A losing position like this one sits at the back of the queue. ADL is not built to hit it.

Why leverage matters as much as profit (illustrative numbers)

Three made-up BTC longs, same side, same moment:

• Trader A: +10% profit, effective leverage 4 -> score 0.10 x 4 = 0.40
• Trader B: +10% profit, effective leverage 16 -> score 0.10 x 16 = 1.60
• Trader C: +25% profit, effective leverage 2 -> score 0.25 x 2 = 0.50

B is first in line even though C has the bigger gain. Same profit, four times the leverage, four times the score.

Three habits KCEX recommends to stay lower in the queue

• Keep leverage reasonable. It multiplies your score directly.
• Take profit in batches instead of letting a big unrealized gain sit.
• Set take-profit and stop-loss orders so an extreme candle does not catch you passively.

What ADL is not

ADL is not a penalty and it is not a liquidation of your account. The part of your position that gets closed is settled at the bankruptcy price of the liquidated counterparty, so you keep the realized profit on that slice. What you lose is the rest of the move you were riding and the control over when you exit. That is why traders with a large open gain and high effective leverage should treat a partial take-profit as cheap insurance against being pulled out at a moment they did not choose.

Takeaway: liquidation punishes positions that are wrong. ADL, when it happens, lands on positions that are right and heavily leveraged.