What is Slippage

Slippage occurs when there is a discrepancy between the order price a trader requests and the de facto price he settles for when the transaction is executed. This happens due to fluctuations in an asset’s market price between the moment the order is placed and the moment it goes through.

Slippage is common but has more gravity in cryptocurrency market that are highly volatile. It is quite relevant when employing decentralized exchanges.

The discrepancy between the requested price and the actual price can be positive or negative. As a result, slippage can be positive or negative, depending on whether the order is a buy or sell order and whether the asset’s price increases or decreases. If the slippage benefits the trader, it is considered positive, otherwise it is negative.

Limit orders could allow traders to escape slippage and the potential associated losses. Typically, traders agree on a certain slippage tolerance. The right tolerance must be chosen. A tolerance too low could cause the trader’s transaction to be abandoned, whereas a tolerance too high could be detrimental.

Slippage

Slippage occurs when there is a discrepancy between the order price a trader requests and the de facto price he settles for when the transaction is executed.

Related terms

Supply chain Stablecoin Support Satoshi Nakamoto Smart Contract Staking pool

Join our free newsletter for daily crypto updates!