Slippage
Also called: price slippage · slippage tolerance
Definition
Slippage is the difference between the price you expect when you place a trade and the average price at which the trade actually fills, usually caused by thin liquidity or fast-moving markets.
This entry is shown in English.
How Slippage works
On a centralized exchange, slippage happens when your market order is larger than the size available at the best price, so it fills across several price levels in the order book. It also happens when the price moves between the moment you click and the moment your order arrives.
On decentralized exchanges using liquidity pools, every trade moves the price along a curve. The bigger your trade relative to the pool, the worse your average price, which is called price impact. DEX interfaces let you set a slippage tolerance; if the final price is worse than that limit, the transaction fails instead of filling.
Slippage can work in your favour, but in practice it usually costs money on market orders. To reduce it, trade liquid pairs, split large orders, use limit orders and avoid trading in the seconds after major news. On DEXs, a very high slippage tolerance can make you an easy target for front-running bots.
Example
Suppose you want to buy 5,000 USDT of a token showing a price of 2.00 USDT. On a thin pool, your trade pushes the price up, and you receive 2,450 tokens instead of the expected 2,500. Your average price is about 2.041, so slippage was roughly 2 percent, costing about 100 USDT. Splitting the order into five 1,000 USDT trades spaced out over time could reduce the impact if liquidity refills between them.
Common mistakes
- Setting slippage tolerance to 10 percent or more on a DEX without understanding why a trade failed.
- Placing one large market order in a thin order book instead of splitting it or using limit orders.
- Blaming the exchange for slippage that came from your own order size.
Learn and practise
FAQ
What is a good slippage tolerance?
For liquid pairs, many traders use around 0.5 percent or less. Volatile or low-liquidity tokens may need more, but a high setting increases the risk of a bad fill.
Is slippage a fee?
No. Slippage is not charged by the exchange; it is the difference in price caused by liquidity and market movement.
Can slippage be positive?
Yes. If the price moves in your favour before your order fills, you can get a better price than expected.