Slippage occurs when the execution price of a trade differs from the expected price at the time of order placement. This discrepancy typically arises when trading platforms cannot immediately fulfill orders at the desired price due to market conditions.
For crypto traders, minimizing slippage is crucial because it introduces additional uncertainty into an already volatile market. Understanding slippage empowers you to mitigate its effects on your trading outcomes.
This guide delves into the mechanics of slippage, its causes, and actionable strategies to reduce its impact on your trades.
TL;DR
- Slippage = Difference between expected and executed trade prices.
- Caused by low liquidity and high volatility, leading to unpredictable trading conditions.
- Can be positive (better-than-expected price) or negative (worse-than-expected price).
- Mitigation tactics: Trade liquid assets, use limit orders, split large orders, and time trades during peak activity.
What Is Slippage?
Slippage reflects the variance between a trade’s anticipated price and its actual execution price. It manifests in three forms:
- Negative slippage: Execution price is worse than expected (e.g., higher for buys, lower for sells).
- Positive slippage: Execution price is better than expected.
- Zero slippage: Order fills precisely at the expected price.
Causes of Slippage
Slippage stems from shifts in the bid-ask spread between order placement and execution. Key factors include:
- Low liquidity: Thin order books lack depth to absorb large orders without price movement.
- Market volatility: Rapid price swings widen spreads, especially during news events or low-volume periods.
- Order size: Large trades exhaust available liquidity at the desired price, pushing execution to less favorable levels.
👉 Learn how liquidity impacts crypto markets
Slippage Example
Scenario: Buying SOL with a Market Order
- Expected price: 168.19
- Executed price: 168.84 (due to sudden demand)
- Result: Negative slippage of 0.65 per unit.
For a 100-SOL order, this adds $65 to the cost. Conversely, positive slippage could save you money—but unpredictability remains a challenge.
How to Minimize Slippage
1. Place Smaller Orders
Split large orders into smaller chunks to reduce market impact.
- Trade-off: Risk missing target prices if markets move between executions.
2. Use Limit Orders
Limit orders guarantee prices but may not fill if markets don’t reach your specified level.
3. Trade High-Liquidity Assets
Focus on tokens like BTC, ETH, or SOL with deep order books and high trading volumes.
👉 Explore top liquid crypto assets
4. Trade During Peak Hours
Activity overlaps (e.g., London/New York trading hours) boost liquidity. Monitor exchange volume tools for real-time data.
FAQs
Q: Is slippage unique to crypto?
A: No, but crypto’s volatility makes it more frequent than in forex or stocks.
Q: Can slippage be avoided entirely?
A: No, but strategies like limit orders and liquidity-focused trading reduce its likelihood.
Q: Does slippage occur on decentralized exchanges (DEXs)?
A: Yes—low liquidity pools on DEXs often exhibit significant slippage.
Final Thoughts
Slippage is an inherent trading challenge, especially in crypto. By prioritizing liquid assets, optimizing order types, and timing trades strategically, you can curb its impact.
For further risk management insights, explore our guides on stop-loss strategies and DCA (dollar-cost averaging).
Disclaimer: This content is informational only and does not constitute financial advice. Crypto trading involves risk; assess your tolerance before participating.
© 2025 OKX. Reproductions must credit: "This article is © 2025 OKX and used with permission."
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