Slippage
Slippage: Slippage is the difference between the price you expect when you place a crypto trade and the average price your order actually fills at. It happens when prices move quickly or when there are not enough orders at your price, so a large or fast trade fills across several worse prices.
What causes slippage
Two things drive most slippage. The first is liquidity: if few buy and sell orders sit near the current price, a market order has to reach further into the order book to fill. The second is volatility: when the price moves between the moment you click and the moment the trade settles, the fill can differ from the quote. Large orders in small, newly listed tokens tend to suffer most.
A simple worked example
Say you place a market order expecting to pay A$1,000 for a coin, and the order fills at an average of A$1,010 because the best offers ran out. The A$10 difference is 1% negative slippage. This is a hypothetical illustration, not a typical figure. Slippage can also be positive if the price moves in your favour before the fill.
Slippage tolerance on decentralised exchanges
On a decentralised exchange that uses an automated market maker, your wallet asks you to set a slippage tolerance, the maximum price change you will accept. If the price moves further, the swap fails instead of filling. A very high tolerance can let your swap fill at a much worse price, and it can make the trade an easier target for bots that trade just before and after you.
How investors limit slippage
Use a limit order where the exchange offers one, so you set the most you will pay or the least you will accept. As our research team often points out to members, a limit order protects you from negative slippage but may not fill at all if the price never reaches your level. Splitting a large order, trading markets with deeper liquidity and avoiding thin markets during sharp moves also help. A gap between an exchange quote and a price-tracking website is not always slippage; spreads and fees can also explain it.
Frequently asked questions
Is slippage the same as a trading fee?
No. A fee is a set charge from the exchange or network. Slippage is the price difference caused by liquidity and price movement. Your total cost of a trade can include both.
What slippage tolerance should I set?
There is no single right number. A lower tolerance protects your price but makes failed swaps more likely during volatile periods. Check the quoted minimum you will receive before confirming any swap.
Can slippage be positive?
Yes. If the price moves in your favour between placing and filling the order, you can receive a better price than expected.