Slippage

Slippage is the gap between the price you expect when you place a trade and the price you actually get when it executes. It can work for or against you, but usually matters most when it costs you.

How it works

Slippage arises because prices move and liquidity is limited. Between the moment you submit an order and the moment it fills, the market can shift, and a large order may have to fill across several price levels, ending at a worse average price. It is most pronounced in fast-moving or thinly traded markets.

Why it matters

On decentralized exchanges, traders often set a “slippage tolerance” — the maximum price change they will accept — to avoid being filled at a far worse rate. Setting it too low can cause trades to fail; too high can expose you to bad fills or manipulation.

Example

Expecting to buy at $10 but having the order fill at $10.20 because of low liquidity is 2% slippage.