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.