Slippage — Trading Wiki

What Slippage means

The difference between expected trade price and actual execution price. Occurs during high volatility or low liquidity. Can be positive or negative.

In depth

Slippage is the difference between the expected execution price of a trade and the actual price at which the trade is filled. It occurs most frequently with market orders during periods of high volatility, low liquidity, or when trading large position sizes relative to available order book depth. Slippage can be either negative (executing at a worse price than expected, which is most common) or positive (executing at a better price, which is less common but does occur). Negative slippage happens because the market moves between the time you submit an order and the time it reaches the exchange and gets filled.

In fast-moving markets, this delay — even if measured in milliseconds — can result in significant price differences. For example, if you submit a market buy order for Bitcoin when the displayed price is $67,000 but by the time the order executes, the best available ask has moved to $67,050, you've experienced $50 of negative slippage. Slippage is particularly impactful in cryptocurrency markets and forex markets that operate 24/7, where sudden news events or liquidation cascades can cause rapid price movements. On decentralized exchanges (DEXs), slippage is even more pronounced because of the Automated Market Maker (AMM) mechanism — large trades move the price along the bonding curve, and the price impact is directly proportional to the trade size relative to the liquidity pool depth.

DEXs typically require users to set a 'slippage tolerance' (0.5-3%) before executing a swap.

Key points

• Difference between expected and actual execution price
• Worse during high volatility and low liquidity conditions
• Limit orders eliminate slippage risk; market orders are vulnerable

Practical tip

Estimate your slippage cost before placing any market order: check the order book depth at your target size. If your order would consume multiple price levels, use a limit order or break your trade into smaller pieces. On DEXs, setting slippage tolerance too high invites MEV bots to sandwich-attack your trade.

Why it matters when you are learning

Slippage is a hidden cost that eats into your profits. Even small amounts compound over hundreds of trades — use limit orders to control it.

Practising Slippage on the simulator

Reading about Slippage and using it are different skills. Try it once in the simulator on an instrument you already follow, write down beforehand what you expect to happen, and check the journal a day later to see whether it played out that way. Educational simulation only — not financial advice.