What is Slippage?
Slippage refers to the difference between the expected price of a trade and the actual price at which it is executed. It occurs when market conditions cause price fluctuations between the time a trade is placed and when it is completed.
Why does Slippage occur?
Slippage happens due to market volatility and liquidity constraints. In highly volatile markets, prices can change rapidly, causing trades to execute at different rates than expected. In low-liquidity markets, large orders can shift prices significantly, leading to slippage.
How can I reduce Slippage?
- Adjust Slippage Tolerance – Many platforms allow you to set a slippage tolerance to control acceptable price differences.
- Trade in High-Liquidity Pools – More liquidity means less price movement when executing large trades.
- Avoid Trading During High Volatility – Price swings are more frequent during major market events or news releases.
- Use Limit Orders Instead of Market Orders – Limit orders ensure your trade executes at a set price or better, reducing unexpected slippage.
What is the difference between Slippage and Price Impact?
- Slippage happens due to market volatility and execution delays, affecting how much of a trade fills at a different price.
- Price Impact occurs when a trade itself moves the market price due to liquidity constraints.
Can I avoid Slippage completely?
No, slippage is a normal part of trading, especially in decentralized exchanges. However, by using limit orders, trading in high-liquidity pools, and adjusting slippage tolerance, you can minimize its effects.
Where can I check Slippage before trading?
Most decentralized exchanges (DEXs) display an estimated slippage percentage before confirming a trade. Always review this on platforms like Uniswap, PancakeSwap, or Gem Wallet’s swap feature to avoid unexpected losses.