What Is Slippage?
Slippage refers to the price difference between the expected price of a transaction and the actual execution price of the transaction. Usually, when market volatility intensifies, downward market orders are most prone to slippage. However, placing large orders when there is not enough buying or selling interest to maintain the expected trading price may also result in slippage.
For example, if you place a purchase order for a certain token, the ideal state would naturally be to close the transaction at the price you have chosen. But when executing a transaction, the final price obtained is either higher or lower than the price you chose when placing an order, which is when you encounter slippage. For example, your expected purchase price is $100.10, but due to rapid price fluctuations and insufficient orders for individual prices, your actual transaction price may be $100.20, and the $0.10 difference between the two is the so-called slippage.
The buying price higher than the price at which you placed the order is a negative slippage, indicating that the trading cost exceeds expectations. The buying price below the price at which the order was placed is a positive slippage, indicating that the trading cost is lower than expected. The situation of selling orders is exactly the opposite of the above.
Slippage is one of the inevitable factors that affect trading. Slippage often occurs in the cryptocurrency market, especially in DEX. The lower the trading volume and liquidity of the assets you trade, the higher the slippage, and the more funds you lose.
How To Avoid Slippage?
Slippage cannot be completely avoided in trading, but it can be reduced by setting a slippage limit to reduce the impact of market turbulence or insufficient market liquidity causing excessive slippage.
When you use the Gate Web3 Wallet for spot trading, you can set the maximum slippage limit in the settings function. After setting up, if the actual amount obtained during your trading process is less than the amount obtained under the maximum slippage limit, the transaction will be canceled so as to reduce your trading losses.
