What is slippage?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
Slippage is the gap between the price you expected when placing an order and the price you actually got. It widens in fast markets and in thinly traded assets. On a DEX you set the tolerance yourself, so it pays to know what the number does.
Key points
- The gap between expected and executed price
- Widens as liquidity thins
- On a DEX, the tolerance is your setting
- A wider setting authorises a worse fill
Definition
The difference between the price anticipated at order time and the price at which the trade actually executes, caused by market movement and available depth.
On an order book, a market order eats the resting orders from the best price downwards, so a large order finishes at worse prices. On an AMM the price comes from pool balances, so a large trade moves it as it executes — the same effect by a different route.
A DEX interface exposes a slippage tolerance setting: an instruction saying 'fill me even if the price ends up this much worse'. Set it too tight and a small move causes the transaction to fail, costing gas for nothing. Set it too loose and a badly worse fill goes through unchallenged.
That setting also determines your MEV exposure: an attacker knows any price movement within your tolerance still executes, so generous settings attract them. The working rule is tight tolerances on deep, liquid pairs and only as much as necessary on thin ones.
Watch out for
- · Widening the tolerance is you authorising a worse fill within that range
- · A failed transaction still costs gas
- · In thin markets the displayed price and the realised fill can diverge sharply