Slippage

Slippage is the gap between the price you expect when you place a trade and the price you actually get when it executes. It can work for or against you, but usually matters most when it costs you.

How it works

Slippage arises because prices move and liquidity is limited. Between the moment you submit an order and the moment it fills, the market can shift, and a large order may have to fill across several price levels, ending at a worse average price. It is most pronounced in fast-moving or thinly traded markets.

Why it matters

On decentralized exchanges, traders often set a “slippage tolerance” — the maximum price change they will accept — to avoid being filled at a far worse rate. Setting it too low can cause trades to fail; too high can expose you to bad fills or manipulation.

Example

Expecting to buy at $10 but having the order fill at $10.20 because of low liquidity is 2% slippage.

Slippage: Frequently Asked Questions

What causes slippage when I trade?

Slippage happens because prices move and liquidity is limited. Between submitting an order and it filling, the market can shift, and a large order may need to fill across several price levels, ending at a worse average price. It is most pronounced in fast-moving or thinly traded markets.

What slippage tolerance should I set on a decentralized exchange?

Slippage tolerance is the maximum price change you will accept on a trade. Setting it too low can cause trades to fail when the price moves even slightly, while setting it too high can expose you to bad fills or manipulation. The right level depends on the asset's liquidity and how fast it is moving.

Is slippage always a loss?

Not necessarily. Slippage can work for or against you, since the price could move in your favour before the order fills. In practice, though, it matters most when it costs you, which is why traders try to limit it. For example, expecting to buy at $10 but filling at $10.20 is 2% slippage against you.

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