Crypto Slippage Explained: What It Is and How to Avoid It

Definition

Slippage is the difference between expected and executed trade price due to market movement or insufficient liquidity.

Why It Matters

• Impacts profitability

• Larger orders = higher slippage risk

• More common in volatile markets

• More pronounced on DEXs

How It Works

1. Order placed

2. Market moves / liquidity check

3. Order executed at best available price

4. Slippage calculated

Positive = better price than expected
Negative = worse price than expected

Example

Expected ETH buy: $3,000
Executed at: $3,005
Slippage = $5 per ETH

Buying 10 ETH → $50 total slippage

Common Mistakes

• Ignoring slippage tolerance

• Trading during extreme volatility

• Using market orders in illiquid markets

• Underestimating network fees

Quick Checklist

• Set slippage tolerance

• Check liquidity depth

• Prefer limit orders

• Avoid network congestion

• Track execution prices

Related Terms

Liquidity
Order Book
DEX
Impermanent Loss
Market Order
Limit Order

FAQs

• What is slippage tolerance?
  Maximum acceptable percentage difference before trade fails.

• Is slippage always negative?
  No, it can be positive or negative.

• How to reduce slippage on DEXs?
  Lower tolerance, split trades, trade during high liquidity, use limit orders.

• What causes slippage?
  Volatility, low liquidity, large order size.

• Slippage vs spread?
  Slippage = execution difference; spread = bid-ask difference.

Sources

Investopedia
Coinbase Help
Ledger Support
Kairon Labs Blog

Disclaimer

For informational purposes only. Crypto trading involves significant risk.