Slippage is what happens when the price you expect isn’t the price you get. It’s common in crypto trading, especially when markets move fast or liquidity is low. Whether you’re using a decentralized exchange or a top-tier platform, slippage can cost you—or save you—money. Understanding how it works helps you trade smarter and avoid costly mistakes. This guide breaks it all down, step by step.
What Is Slippage?
Slippage is the difference between the price you expect for a trade and the price you actually get when it’s executed.
Let’s say you want to buy Bitcoin at $100,000. You hit “Buy,” but by the time your order fills, the price has jumped to $100,100. That $100 difference is slippage.
It happens because crypto prices move quickly. The moment you place an order, the market might shift—especially if you’re trading during high volatility or with large orders. That gap between expectation and reality? That’s your slippage.
Real Example: $9M Trade Ends in Substantial Slippage
In January 2024, a trader tried to buy $9 million worth of dogwifhat (WIF), a popular Solana-based memecoin. The coin was riding high on hype—but had thin liquidity. The order was split into three chunks: $6.25M, $1.78M, and $893K. That size alone was enough to move the market.
As each chunk executed, the price of WIF spiked—hitting $3 per token. But then, minutes later, it crashed back down to $0.15. The trader lost over $5.7 million. All because their order pumped its own price mid-execution. That’s substantial slippage in action.
This wasn’t bad luck—it was a mistake in trade execution. You can’t go into a highly volatile market with massive orders and expect a clean fill. The problem wasn’t just volatility. It was poor planning.
Slippage hits hardest when you aren’t prepared. If you don’t manage slippage, unexpected price changes will do it for you—and they don’t care about your strategy.
The Difference Between Positive and Negative Slippage
Slippage isn’t always bad. It can work in your favor—or against you.
Positive Slippage (You Pay Less)
This happens when the price moves in your favor during the trade.
Example: You place a buy order at $1.00, but it executes at a better price of $0.98. You get the same asset for less. It’s rare but possible, especially in fast-moving markets with strong liquidity.
Negative Slippage (You Pay More)
This is the more common kind—and the one traders fear. You place an order at $1.00, but it executes at $1.02. You get fewer tokens than expected or pay more than planned. If you’re selling, you may get less than you hoped.
Why Does Slippage Happen? Common Causes
Slippage happens when there’s a gap between the expected price of a trade and the executed price. In crypto, that gap can widen fast—and hurt your returns.
Market Volatility and Fast Price Movements
Crypto is known for market volatility. Prices can jump or crash in seconds. If you place a trade during a big move, the price may shift before your order fills. That leads to slippage in crypto—which is often worse during news events, token launches, or crashes.
Low Liquidity (Not Enough Buyers/Sellers)
If you’re trading a token with low liquidity, it’s harder to match your order exactly. The system fills your trade using the closest available prices, which may not be ideal. That’s a common cause of large slippage, especially on small-cap coins.
Order Execution Speed and Delay
Even a short delay between order placement and execution can lead to slippage. This is true on both centralized and decentralized exchanges. The faster the rapid price fluctuations, the higher the chance you’ll miss your target price.
Network Congestion (Especially With Blockchain-Based Trades)
On decentralized exchanges, every trade goes through the blockchain. When networks like Ethereum get congested, your transaction might have to wait in line—while prices keep moving. That delay widens the gap between what you wanted and what you’re going to get.
Large Trade Sizes in Small Markets
Trying to buy or sell a big chunk in a small market? You’ll move the price just by placing the order. There might not be enough buyers or sellers at your target price, so the system fills the rest at worse prices—creating slippage.
Calculating Slippage: A Step-by-Step Guide
Slippage is easy to measure once you know what to look for. You’re comparing the market price you expected with the actual price you got.
Step 1: Identify the Expected Price
This is the price shown at the time you place your order.
Step 2: Record the Executed Price
This is the final price at which your trade is filled.
Step 3: Use the Slippage Formula
Slippage (%) = ((Actual Price − Expected Price) / Expected Price) × 100
Example
You expect to buy a token at $2.00. The trade goes through at $2.06.
Slippage = ((2.06 − 2.00) / 2.00) × 100 = 3%
That means you paid 3% more than planned.
Slippage becomes a problem when market fluctuations are high or liquidity is low. It also hurts more with large trades or poor timing. That’s why your trading strategy should always include a slippage check—especially on decentralized platforms.
How to Avoid or Minimize Slippage
You can’t eliminate slippage entirely, but you can control it. Smart choices before placing a trade can help you limit risk and hold onto more value.
Use Limit Orders Instead of Market Orders
Limit orders let you set the exact price you want. The trade only goes through if the market matches or improves on your target. You avoid surprises because the executed trade price will never be worse than your limit.
Market orders, on the other hand, fill instantly at the best available price. That can work in high-liquidity markets, but it leaves you exposed to price jumps and slippage.
Trade When the Market Is More Liquid
The crypto market has peak hours. Liquidity tends to be higher during the overlap between U.S. and European trading sessions. When more buyers and sellers are active, your trade has a better chance of being filled at a favorable price.
Avoid Trading During Major Announcements or Sudden News
News moves prices. Sudden market movements can create extreme volatility—and heavy slippage. Avoid trading during major updates like interest rate decisions, protocol upgrades, or SEC announcements. The price you see may not be the price you get.
Here’s how fast it can go wrong. In March 2024, a UK investor using Coinbase tried to cash out Bitcoin on Coinbase during a Trump-driven market spike. At the time, BTC showed £67,000—up 20% from when he bought. It looked like the perfect exit.
But as he pressed sell, the price tanked. His trade went through at just £57,000. That’s a crypto slippage loss of £10,000 per BTC—about 15% lower than the price he expected. In his case, that erased 10% of his total investment in seconds.
Why did it happen? Because the market conditions were chaotic. A sudden wave of traders jumped in or out. Prices shifted fast. And the system filled his order at the next available price—well below what he’d seen.
This is how trading outcomes get wrecked by poor timing. In fast markets, don’t assume the quote is locked in. Wait for calm, or set a limit order. Otherwise, the market will decide your price for you.
Split Large Trades into Smaller Ones
Big trades in low-liquidity markets can move prices against you. If you’re trading a large amount, break it into smaller orders. This helps reduce slippage by minimizing the impact on the order book.
Set Slippage Tolerance (Especially on DEXs)
Decentralized exchanges let you define slippage tolerance—a percentage range you’re willing to accept. If the actual executed price goes beyond that range, the trade won’t go through. It’s a basic but powerful way to protect yourself in volatile markets.
Slippage Tolerance: What It Means and How to Set It
Slippage tolerance is a setting that protects you from bad trades. It tells the exchange how much price movement you’re willing to accept between placing and filling your order.
You set a slippage percentage—say 1% or 2%. If the final execution price moves beyond that range, the trade won’t go through. That way, you avoid getting filled at a level you never agreed to.
Let’s say you’re trading crypto and want to buy a token at $1.00. You set a 2% slippage tolerance. That means your maximum price is $1.02. If the price jumps above that during the trade, the platform cancels the order.
This matters most on decentralized exchanges (DEXs), where prices shift fast and execution relies on network speed. If you don’t set limits, you’re wide open to excessive slippage—especially when trading low-liquidity or high-volatility tokens.
The higher your slippage setting, the faster your trade completes—but the worse the price difference can be. Set it too low, and the trade might fail. Set it too high, and you risk ending up with more substantial slippage.
Get into the habit of adjusting it. The right setting depends on what you’re trading and how stable the market is.
Slippage on Centralized vs. Decentralized Exchanges
Where you trade affects how slippage occurs—and how you can control it. Centralized and decentralized platforms handle orders differently, and that changes the risks.
How Slippage Manifests on Centralized Exchanges (CEXs)
On centralized exchanges like Binance or Coinbase, trades go through internal order books. You place an order, and the system matches it to the nearest available price.
When volatility spikes or there are fewer buyers (or sellers), your trade might fill at a worse rate than expected. The bigger your order, the harder it is to get your requested price. Slippage is often less visible—but it’s still there.
CEXs usually give you more stability, but they also control execution. That creates an inherent risk: you don’t always know how much control you’ve lost until after the trade clears.
Understanding Slippage on Decentralized Exchanges (DEXs)
On DEXs like Uniswap or PancakeSwap, trades happen through smart contracts. You interact directly with liquidity pools instead of order books.
Here, slippage occurs in real time, based on how your order impacts the pool. If there isn’t enough liquidity, you’ll get a worse rate. DEXs let you set a slippage tolerance—and if you don’t, your trade might blow past your specific price without warning.
The Role of Automated Market Makers (AMMs) in Slippage
Most DEXs use AMMs to manage pricing. These algorithms raise or lower token prices based on supply and demand inside the pool.
If you’re swapping a large amount, the AMM adjusts pricing to reflect your trade. The more you take from the pool, the worse your rate gets. That’s why DEXs show you a maximum amount you’ll receive—and let you cap how much slippage you’ll accept.
Bottom line: CEXs give you smoother execution. DEXs give you more control—but only if you know how to use it.
Final Words
Slippage is part of cryptocurrency trading—but you don’t have to get burned by it. Every trade carries potential slippage, especially in fast or thin markets.
To stay ahead, use limit orders, monitor liquidity, and set slippage tolerance. These tools will help you avoid slippage that could eat into your profits.
The better you understand execution mechanics, the better your trades will be. Slippage won’t disappear—but with the right strategy, you control how much it costs you.
FAQ
Is slippage always a bad thing in crypto trading?
No, not necessarily. Slippage refers to any price movement—good or bad—between order placement and execution. It can work in your favor, but usually means more risk.
How much slippage is considered acceptable?
It depends on the trade and token. In general, under 1% is ideal; anything above 3% can mean increased risk of poor execution.
What’s the difference between a market order and a limit order when it comes to slippage?
Market orders accept whatever price is available, even if it’s a different price than expected. Limit orders offer more control and less slippage.
Can slippage be completely avoided?
Not entirely, but you can minimize it with the right tools. See the section on how to avoid slippage for practical strategies.
Does slippage affect small and large trades equally?
No, it does not. Larger trades often face higher slippage, especially in low-liquidity markets. Splitting trades can help with this.
Is low or high slippage better?
Low is always better. Significant losses often come from ignoring slippage settings or poor timing.
Does slippage vary across platforms?
Yes, slippage works differently on DEXs and centralized platforms. DEXs let you control tolerance settings, while CEXs often hide slippage behind fast execution. See the section on platform comparison for more on this.
Can gas fees increase slippage?
Yes, indirectly. High gas fees can delay your transaction on the blockchain. During that delay, the market may move, and your order might execute at a worse price than expected. This increases the chance of slippage—especially on DEXs where price updates are tied to block confirmation speed.
Does slippage affect the whole cryptocurrency market?
Yes. Slippage is common across the entire cryptocurrency market, especially during volatility or news events.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
