Slippage
Slippage refers to the difference between the mark price and the actual price at which a trade is executed. Setting a slippage limit instructs the platform to reject your order if the actual entry price of your trade is too far away from the current mark price.
How Slippage Happens
Slippage most frequently occurs with market orders, which aim to execute immediately at the best available price. When placing market orders, OLP may not be able to fill the entire order at or near the mark price. As a result, the order may execute at a price further away from the mark. This price difference is slippage.
Avoiding Slippage
While it's difficult to ever completely eliminate the impacts of slippage on trading, there are a number of strategies and configurations you can use to minimize the amount of slippage you face.
Set a slippage limit: Omni allows traders to input a slippage limit when opening market orders, which cancels the order if the execution price of the order is too far away from the mark price. If you open a buy order with a slippage limit of 0.5% at a mark price of $100, you're instructing the platform to cancel your order if the execution price ends up being at or above $100.5.
Use smaller sizing: Large orders are more impacted by slippage than small orders. When entering and exiting a position, consider moving in multiple small trades instead of one large trade, giving OLP more opportunity to source liquidity at your desired price level.
Use limit orders: Limit orders allow you to set the exact quoted price you want your trade to execute at, helping avoid the slippage caused by immediate execution of market orders. If you're willing to wait for favorable price movements for your order(s) to be filled, consider using limit orders.
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