Slippage
Slippage refers to the difference between the expected price of a trade and the actual price at which it is executed. Slippage typically occurs in fast-moving or less liquid markets, where the price changes between the time the order is placed and when it is filled.
How Slippage Happens
Slippage occurs most frequently with market orders, which are designed to execute immediately at the current quoted price price. In volatile markets or with large orders, OLP may not be able to provide enough liquidity at the quoted price level. In these scenarios, the market order gets filled at a whatever price level that OLP is able to provide the necessary liquidity at.
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 deviates unfavorably more than the specified amount from the quoted price. If you open a buy order with a slippage limit of 0.5% at a quoted price of $100, you're instructing the platform to cancel your order if the execution price ends up being at or below $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 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 to minimize slippage.
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