Slippage occurs when market prices change between placing and executing a trade, often increasing trading costs in volatile or illiquid conditions.
It comes in two forms—positive (better than expected) and negative (worse than expected), with negative slippage being more common and costly.
To minimize Slippage, traders should use high-liquidity pairs, set slippage tolerance, avoid volatile periods, and split large orders strategically.
Slippage in crypto trading is the price difference between order placement and execution. Learn its causes, impact, and how to reduce losses with smart strategies.
WHAT IS SLIPPAGE IN CRYPTO TRADING?
In the world of crypto trading, Slippage refers to the difference between the expected price of a trade and the actual price at which it gets executed. This typically happens in the short window between placing an order and when it’s actually filled—during which market conditions may shift.
🔍 Slippage can go in either direction:
Positive slippage means the execution price is better than expected.
Negative slippage, which is more common, means you end up paying more for a buy or receiving less on a sell—directly increasing your trading costs.
This isn’t unique to one type of exchange. Both decentralized exchanges (DEXs) and centralized exchanges (CEXs) experience Slippage, especially during periods of high volatility or when liquidity is thin. For crypto traders, understanding Slippage is crucial—it can quietly eat into your profits if ignored.
>>> More to read: What is FDV in Crypto?
WHAT CAUSES SLIPPAGE IN CRYPTO TRADING?
The primary drivers behind Slippage are market liquidity, price volatility, and trade size. Here’s a breakdown of the main factors:
✅ Low Market Liquidity
Liquidity refers to the availability of buy and sell orders in the market. When liquidity is thin, the order book may not have enough depth to execute your entire trade at the expected price. As a result, portions of the order may get filled at less favorable prices, leading to Slippage.
✅ High Price Volatility
The crypto market is known for its wild price swings. When prices move rapidly—especially during major news events or market shocks—the price you see when placing the order can differ significantly from the execution price. This volatility-driven Slippage is particularly common during periods of FOMO or panic selling.
✅ Large Trade Volume
If you’re placing a large trade in a market with limited depth, it may sweep through multiple price levels in the order book. This causes different portions of your order to be filled at varying prices, often worse than expected. The larger the trade, the greater the risk of Slippage in illiquid markets.
>>> More to read: What is Support & Resistance in Crypto Trading?
TYPES OF SLIPPAGE
Slippage generally falls into two categories: positive and negative. Understanding both is key to managing your trading outcomes.
📌 Positive Slippage
Positive Slippage occurs when the actual execution price is better than what you expected. For example, if you place a buy order for a cryptocurrency and it ends up being filled at a lower price than anticipated, you’ve benefited from positive Slippage—essentially getting the same amount of crypto at a cheaper cost.
📌 Negative Slippage
Negative Slippage, on the other hand, means the execution price is worse than expected. This is more common and typically unfavorable for traders. It results in paying more for a buy order or receiving less from a sell order, which directly increases costs or reduces profits.
>>> More to read: Why You Need To Take Profit & Stop Loss in Crypto
HOW SLIPPAGE AFFECTS CRYPTO TRADING
Slippage can significantly impact the final cost and profitability of a crypto trade. In highly volatile markets, it’s especially common—particularly during sudden price movements triggered by news events or large trades. For example, if a token suddenly surges or crashes due to a major announcement, you might place an order expecting one price, but by the time it executes, the price has already shifted, resulting in unexpected Slippage.
Another group heavily affected by Slippage is arbitrage traders. Their strategies rely on capturing small price differences across exchanges or platforms. Even minor Slippage can erode—or completely eliminate—their profit margins, making the arbitrage opportunity unprofitable or infeasible.
>>> More to read: What is Order Book & How Does It Work?
HOW TO MINIMIZE THE IMPACT OF SLIPPAGE
While Slippage is a common part of crypto trading—especially in volatile markets—there are several strategies traders can use to reduce its impact:
➤ Trade High-Liquidity Pairs
Trading pairs with high liquidity usually have deeper order books, which means your orders are more likely to be filled at expected prices. Choosing well-established tokens with large market caps and strong trading volume can significantly lower your Slippage risk.
➤ Set a Slippage Tolerance
When using decentralized exchanges (DEXs), many platforms allow you to set a Slippage tolerance. This acts as a built-in risk control mechanism: if the price moves beyond your preset range during execution, the transaction won’t go through. It’s a useful way to avoid extreme price deviations caused by volatility.
➤ Avoid Trading During High Volatility
Periods of major news releases, market openings, or sudden price movements are prime times for Slippage to spike. If possible, trade during calmer market conditions when prices are more stable to reduce your exposure to unexpected price shifts.
➤ Use Order Splitting for Large Trades
For sizable orders, breaking the trade into smaller chunks and executing them gradually can help minimize Slippage. This approach reduces the impact your trade has on the market and avoids triggering large price moves within a single transaction.
➤ Choose Low-Slippage Platforms
Not all exchanges are created equal. Look for platforms with strong liquidity depth and efficient matching engines. Exchanges with consistently low Slippage metrics are better suited for traders looking to optimize execution and reduce hidden costs.
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〈What is Slippage? The Hidden Cost in Crypto Trading〉這篇文章最早發佈於《CoinRank》。