What Is Insurance Fund?
A pool of capital an exchange maintains to absorb losses from liquidations that fill worse than the bankruptcy price. A healthy, growing insurance fund protects winning traders from auto deleveraging.
Related Terms
- ADL (Auto-Deleveraging) A last resort mechanism where the exchange closes positions of profitable traders on the opposite side when a liquidation cannot be filled and the insurance fund is insufficient.
- Liquidation The forced closure of a leveraged position when your margin can no longer cover the losses.
Where You Will Meet This Term
You will run into insurance fund constantly on any futures exchange, from the order panel to the position dashboard. If you are still building your foundation, our guides on leverage, liquidation and risk management connect the vocabulary into an actual trading process, and the full glossary covers every other term you will encounter.