WHAT IS SLIPPAGE IN SPOT TRADING
Slippage regarding spot trading is associated with the difference in price a trader expects to pay for a stock against the actual price they spend. This generally happens due to two primary reasons:
1. There is drastic, rapid volatility in the market.
2. There aren’t enough sell or buy orders at the anticipated price which results in low liquidity.
These form of slippage are categorized under these headings:
Positive slippage: The price received is above the expected value.
Negative slippage: The price received is below the expected value. This is the default condition.
Example:
Consider the scenario where you set a buy order for BTC at 30000 dollars in expectation* If* the system works fast enough a trader would see the 30100 dollar mark and be willing to purchase which brings us back to slippage, this scenario with the positive difference is slippage being 100 doll hairs also referred to as negative slippage.
How to reduce Slippage:
Place limit orders instead of using market orders.
Set trades at times when liquidity is high.
Abstain from trading during major news releases, or when volume is low.
