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Slippage Tolerance
Slippage tolerance is taken into account only when a position is liquidated because a position has reached its stop loss or take profit level.
This parameter is measured in percent and represents the maximum allowed difference between the token prices we get from a DEX and from Chainlink.
Let's say the token price at a DEX is $97 and at Chainlink it's $100. In this case the price difference (slippage) equals to $3, which is around 3%. If you set slippage tolerance equal to 2%, the liquidation in such price situation will not get completed, because the slippage is higher than the slippage tolerance level (maximum allowed slippage).
In 99.9% of situations the slippage tolerance of 2% is enough for the position to get liquidated on the first try. Even if the first try fails, the expected liquidation time will not be greater than 3 minutes.
Why do you need slippage tolerance? Slippage tolerance is there to protect you from unfavourable price during position liquidation, which may happen due to your transaction being front-ran by an arbitrageur or due to token price manipulation.
Last modified 2mo ago
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