Slippage
Slippage is the difference between the price a trader expects when submitting an order and the actual price at which the trade executes. Slippage is common in crypto markets and is usually more noticeable during high volatility or when trading low-liquidity tokens.
✦ Key Insight
Slippage affects how much a trader actually receives. A token may appear to trade at $1.00, but a large purchase might execute at an average price of $1.06 because available liquidity at the original price is limited. For small or newly launched tokens, slippage can become extremely large. Understanding slippage is especially important when using market orders, decentralised exchanges, automated trading terminals, and DEX aggregators.
✕ Common Misconceptions
Setting slippage unnecessarily high
Confusing slippage with price impact
Ignoring liquidity before trading
Using market orders on thin markets
Assuming a DEX quote is guaranteed
Increasing slippage repeatedly when a suspicious token cannot be sold
Detailed Explanation
How It Works
When a trader submits a transaction, the market can move before execution.
Slippage can result from:
Low liquidity
Large trade size
Rapid price movement
Network congestion
Changes in the order book
Changes in liquidity-pool reserves
DEX users normally set a slippage tolerance. This specifies how much price movement they are willing to accept before the transaction should fail.
For example, a 1% tolerance means the trader allows execution within roughly 1% of the quoted result.
FAQs
Is slippage always negative?
No. Positive slippage can occur when execution is better than expected.
Why is slippage higher on small tokens?
They generally have less liquidity and more volatile prices.
Should I always use very low slippage?
Not necessarily. Very low tolerance may cause transactions to fail during volatile conditions.
In Practice
Dig Deeper
Market Order
An order to buy or sell immediately at the best available current market price.
DEX Aggregator
A DEX aggregator is a protocol or service that sources liquidity from multiple decentralized exchanges and routes a user’s trade across the best available pools or paths to achieve optimal price and minimal slippage.
Volatility
Volatility describes how much and how quickly an asset's price changes over a given period. A highly volatile cryptocurrency can experience large price movements over short periods, while a lower-volatility asset tends to move within a narrower range.