Slippage
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Key Takeaway
Slippage is the difference between the price you expected to receive on a trade and the actual price at which it executed, caused by market movement or insufficient liquidity.
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What Is Slippage?
Slippage is the difference between the price you expected to receive on a trade and the actual price at which it executed, caused by market movement or insufficient liquidity.
How Slippage Works
Frequently Asked Questions
What is slippage in crypto trading and why does it happen?
Slippage is the difference between the price you see when placing a trade and the price you actually receive when the trade executes. It happens for two main reasons: price movement — the market shifts in the milliseconds between order submission and processing — and low liquidity, where your order is too large for the available volume at the quoted price, forcing the exchange to fill the remainder at less favourable prices. Slippage is more common during volatile market conditions, on low-volume trading pairs, and when using market orders rather than limit orders. For most beginner trades on major pairs, slippage is minimal but still worth understanding.
What is slippage tolerance on a DEX and how should I set it?
Slippage tolerance on a decentralized exchange is the maximum price deviation you are willing to accept before the transaction is automatically cancelled. It is expressed as a percentage — for example, 1% means you accept a final price up to 1% worse than quoted. For stable, liquid pairs like ETH/USDC, a tolerance of 0.5% is typically sufficient. For newer or more volatile tokens, 1% to 3% may be necessary to ensure the transaction completes. Avoid setting tolerance above 3% unless specifically required — high tolerance settings make you a visible target for sandwich bots that exploit the gap between your expected and accepted price.
How can I reduce slippage when buying cryptocurrency?
Several practical steps reduce slippage across both centralized and decentralized exchanges. Use limit orders rather than market orders — limit orders guarantee your maximum buy price and eliminate execution-time price deviation on CEXs. On DEXs, set a conservative slippage tolerance that matches the token's typical volatility. Trade during lower-volatility periods when rapid price movement is less likely. Choose tokens with high 24-hour trading volume and deep liquidity — shallow order books amplify slippage significantly. For large purchases, consider splitting the order into smaller portions over time rather than executing one large market order, which distributes the liquidity impact across multiple transactions.
Common Misconceptions About Slippage
Slippage only affects large or professional traders, not small purchases.
Slippage affects all traders, including beginners making small purchases — particularly when buying low-liquidity tokens on DEXs or smaller exchanges. A token with limited trading volume can produce 5% to 10% slippage even on modest order sizes, effectively adding a hidden cost that dramatically reduces the value of the purchase. Major cryptocurrencies on liquid exchanges show minimal slippage for small amounts, but any purchase of a newly launched or low-volume token carries genuine slippage risk regardless of trade size. Always check trading volume before buying unfamiliar tokens.
Slippage is the same thing as a trading fee.
Slippage and trading fees are distinct costs that both affect the final price received on a trade, but they arise from entirely different mechanisms. Trading fees are explicit, predetermined charges that the exchange deducts at a known rate from every completed transaction. Slippage is an implicit, variable cost caused by price movement or insufficient liquidity — it is not a fee charged by the exchange but an outcome of market conditions at the time of execution. Both costs reduce the effective value received from a trade, and both should be factored into total transaction cost calculations, but they cannot be reduced by the same methods.
Slippage is always a negative outcome for the trader.
Slippage can work in your favour as well as against you. Positive slippage occurs when price moves in a beneficial direction between order placement and execution — meaning you pay less than expected when buying, or receive more than expected when selling. While negative slippage is more commonly discussed because it represents an unintended cost, positive slippage is equally real and mathematically possible in volatile markets. On most CEX market orders, the difference is small in either direction for liquid pairs. On DEXs, positive slippage does occasionally occur and is typically passed to the trader as a better-than-expected fill price.