Glossary
Slippage
Slippage is the difference between the price you expect when you place a trade and the price at which it is actually executed. It comes from market moves during execution and from orders too large for the available liquidity.
Also called Price slippage, Slippage tolerance, Price impact, Execution slippage
See also
Slippage is the gap between the price you see when you submit a trade and the average price you actually get. It can work against you (negative slippage) or, more rarely, in your favour. In crypto, it is most visible on a decentralized exchange and on small tokens with thin liquidity.
Where slippage comes from
Two effects are usually mixed together:
- Market movement: the price changes between the moment you click and the moment the trade settles. On a blockchain, that delay can be several seconds, and other transactions may be executed before yours.
- Price impact: your order is too large compared with the available liquidity. On an order book, a big market order eats through several price levels. On a DEX, it changes the balance of the liquidity pool, which moves the price against you.
A worked DEX example
A pool holds 100,000 tokens and 100,000 USDC, so the quoted price is $1.00. You buy with 10,000 USDC. With the common constant-product formula, the pool’s USDC rises to 110,000 and its tokens fall to about 90,909. You receive about 9,091 tokens, an average price of $1.10, before fees: roughly 10% worse than the quote. With a $100 purchase, the difference would be about 0.1%.
Slippage tolerance
DEX interfaces let you set a slippage tolerance, for example 0.5% or 1%. If the final price is worse than this limit, the transaction is cancelled (you still pay the network fee). A tolerance that is too low makes trades fail; one that is too high exposes you to bots that place orders just before and after yours, a “sandwich attack”, to capture the difference.
Why it matters
Slippage is a hidden cost that can exceed trading fees on large or illiquid trades. It is why large holders, often called whales, split their orders, and why a quoted price is never guaranteed.
How to limit it
- Trade assets and pools with deep liquidity, and check the “price impact” shown before confirming.
- Split large orders, or use limit orders on an exchange that offers them.
- Keep a reasonable tolerance; very high settings are a red flag on suspicious tokens.
- Avoid trading during extreme volatility, when prices and fees jump.