What Is “Slippage” and How Does It Affect the Final Liquidation Price for a Large Position?

Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. For a large liquidation order, slippage is significant because the order size exceeds the available liquidity at the best price level on the order book.

The execution engine must fill the order at successively worse prices, pushing the final liquidation price further away from the mark price. This can result in a loss greater than the remaining margin, increasing the chance of negative equity for the exchange.