What Is Slippage?
Slippage is the difference between the price you expect to pay and the price you actually receive when a trade executes. If you expect to buy BTC at $65,000 but your order fills at $65,050, you experienced $50 of slippage. Slippage can be positive (better than expected) or negative (worse than expected), but is typically negative for market orders.
How Slippage Happens
Slippage occurs when:
- Low liquidity — Not enough orders at the expected price level
- Large order size — Your order exceeds the depth at the best price
- Fast-moving markets — Price changes between order placement and execution
- DEX swaps — AMM price impact based on pool size relative to trade size
Why It Matters for Traders
Slippage is a hidden cost that can significantly erode returns, especially for high-frequency traders or those trading illiquid assets. In DeFi, slippage tolerance settings (e.g., 0.5%) protect against excessive price impact but can also expose you to MEV attacks if set too high. Monitoring slippage per trade is essential for accurate P&L tracking.
How Perps Traders Use This
For CEX perpetual futures, treat slippage as context around entries, exits, and risk, not as a standalone signal. Pair it with funding, open interest, and liquidation heat so one indicator does not drive the whole book.
Formula and Worked Example
Example numbers only (not a live quote).
If your account equity is $10,000 and you risk 0.5% per idea, the cash risk budget is $50. With a stop 1% away from entry on a linear USDT-margined perp, notional size is about $5,000 before leverage optics. Size from stop distance first, then pick leverage that fits the margin mode.
Common Mistakes
- Treating a single print of slippage as a trade signal without checking funding, open interest, and your liquidation price.
- Mixing venue conventions (coin-margined vs USDT-margined, cross vs isolated) and reading the wrong mark.
- Copying example numbers from a glossary into live size without checking the current book depth and fee schedule.
- Ignoring related terms that change the meaning of the print on a given day.
