What Is Slippage in Crypto and How To Minimize Its Effects on Your Trading
Slippage in crypto refers to the difference between the expected price of a trade and the actual price when it executes. This can be either higher or lower than anticipated, impacting your trade outcome.
Think of it like planning to buy an item in a shop at a set price, only to see the price change at checkout. That sudden shift—better or worse—is the essence of slippage in crypto trading.
Slippage meaning covers both “positive slippage” (better deal) and “negative slippage” (worse result). Understanding how slippage works is essential for every trader aiming for smarter investment decisions.
Key Notes:
Slippage in crypto trading is the difference between the expected and actual trade price, which can be either positive (better price) or negative (worse price), directly impacting trading results.
Major causes of slippage include high volatility, low liquidity, large trade sizes, and network or execution delays, all of which can be managed with informed trading strategies.
On centralised exchanges (CEXs), slippage is managed with order types and liquidity awareness, while decentralised exchanges (DEXs) use slippage tolerance settings to help traders control execution risk.
Strategies to minimise slippage include using limit orders, breaking up large trades, trading high-liquidity pairs during peak times, setting appropriate slippage tolerance, and leveraging DEX aggregators for optimal pricing.
There are two main types of slippage in crypto: positive and negative slippage. Both affect your trading results, but in different ways. Let's delve more below.
Positive vs negative slippage
Positive slippage happens when you execute a trade at a more favourable price than you expected. This benefits you directly. For example, imagine you intend to buy a digital asset at $100, but due to rapid price improvements, your trade is filled at $98. You’ve secured a better deal than planned. The same principle applies to selling—if you aim to sell at $100 and your order is filled at $102, you gain extra profit thanks to positive slippage.
Negative slippage, on the other hand, is less welcome. It occurs when your order executes at a worse price than anticipated. For instance, you try to sell your crypto at $50, but the trade completes at $48 because the market moves quickly against you. In this case, you lose out compared to your original expectation.
Most traders encounter negative slippage more often, especially during periods of high volatility or when trading assets with low liquidity. Rapid price swings, insufficient orders in the market, or slow transaction times all amplify the risk of negative slippage.
Understanding these two types helps you manage expectations and adapt your trading strategy according to market conditions. Recognising when you are likely to benefit or lose from slippage is essential for making smarter decisions as a crypto trader.
Example of slippage in a crypto trade
Let’s look at a straightforward example to see slippage in action. Suppose you place a market order to buy 1 ETH at an expected price of $2,000. Due to a sudden price surge as your trade is being processed, your order is actually executed at $2,015. This discrepancy between the executed price and the expected price is slippage in crypto trading.
You can quantify the slippage as a percentage, which helps you understand its impact on your trade. Simply use this formula:
((Executed Price – Expected Price) / Expected Price) × 100
In this situation:
((2015 – 2000)/2000) × 100 = 0.75% slippage.
This calculation shows you lost 0.75% compared to your intended entry, all due to market movement before execution. Calculating slippage keeps you aware of how much your effective trading cost might change, and helps you track if your strategies are working as expected. Use this simple percentage for both positive and negative slippage in your trades to monitor your trading performance efficiently.
What Causes Slippage in Crypto Markets?
Slippage is a reality in crypto trading and understanding its causes helps traders manage risk. Let’s explore key reasons why slippage occurs and how each one can impact your trades.
Volatility and sudden price movements
Cryptocurrency markets are highly volatile by nature. Prices can change in seconds due to breaking news, market sentiment, or large trades by institutional players. If you submit a trade during a sharp price movement, the executed price may end up far from what you expected.
This kind of volatility is a leading driver of slippage, especially during periods of intense speculation or major announcements.
Liquidity and order book or pool depth
Liquidity measures how easily you can buy or sell an asset without dramatically affecting its price. In markets or trading pairs with high liquidity, there are plenty of buyers and sellers, so trade orders are filled close to the intended price.
But in low-liquidity markets—where there are few active participants or shallow liquidity pools on decentralised exchanges—your order may have to “work through” multiple buy or sell levels, causing greater price shifts and higher slippage.
Large trade sizes
Order size plays a critical role in slippage. If you try to execute a large trade relative to the available liquidity in the order book (on a CEX) or liquidity pool (on a DEX), the order can exhaust current buy/sell offers quickly. This results in your order being filled across several different price levels, pushing the average price away from your expectation. Splitting large trades into smaller chunks where possible can help reduce slippage impact.
Network congestion and slow execution
Network congestion affects both centralised and decentralised exchanges. On CEXs, traffic spikes or technical issues can slow down order execution. On DEXs, blockchain congestion and high gas fees often lead to delayed transaction confirmation.
In both cases, the gap in time between order placement and completion increases the risk that the market price will move—sometimes significantly—before your transaction executes. This often leads to unexpected slippage during periods of peak trading demand.
Slippage on Centralised vs Decentralised Exchanges
Understanding how slippage works on different platforms is vital for any crypto trader. Let’s examine how slippage operates on centralised exchanges (CEXs) compared to decentralised exchanges (DEXs), and why your trading experience might vary significantly between them.
Slippage on centralised exchanges (CEXs)
On CEXs, such as Binance or Coinbase, trading happens via an order book system. The order book lists all current buy and sell offers for a particular crypto pair. When you submit a market order, the platform matches your order with the best available prices in the book. If you’re dealing with a high-liquidity asset, your order is likely to be filled close to your expected price.
However, if the order book is thin or your trade size is large, your order might “eat through” several price levels. This results in you buying or selling at less favourable rates, increasing slippage. For example, a market order larger than the available volume at the best price must be filled at worse prices as the system moves down the order book. The effect is amplified during periods of high volatility or low trading activity.
You may also like to read: Leverage Trading in Crypto
To combat unpredictable execution prices, CEXs allow you to use limit orders. A limit order lets you set a specific buy or sell price. The order stays open until the market reaches your price, helping to avoid unexpected slippage. However, the drawback is that your order might never be fulfilled if the market doesn’t move in your favour. It’s a trade-off between execution certainty and price control.
Unlike DEXs, CEX platforms do not feature a specific “slippage tolerance” setting. Instead, slippage on CEXs is managed mainly by your choice of order type and remaining vigilant about market conditions and liquidity.
Slippage on decentralised exchanges (DEXs)
DEXs, such as Uniswap or SushiSwap, operate using Automated Market Makers (AMMs) and liquidity pools rather than order books. Here, the price of a token is determined by a mathematical formula based on the pool’s ratio of the two assets, not by direct buyer-seller matching.
If you place a small trade on a large, well-funded pool, the price impact is minimal—resulting in little slippage. Large trades or trades on pools with low liquidity, however, cause significant price shifts. This is because your transaction changes the balance between the two assets in the pool, instantly causing the exchange rate to move against you. The larger your trade relative to the pool, the more slippage you’ll experience.
To protect traders, DEX platforms offer a “slippage tolerance” setting. This feature allows you to set the maximum percentage change in price you’re willing to accept for your order. If the final execution price moves beyond your chosen tolerance, the transaction is automatically reverted. This gives you added control, but also carries the risk of failed trades if your tolerance is set too tightly, especially during volatile or congested network conditions.
By understanding these structural differences, traders can make informed decisions, adjusting their execution tactics depending on whether they are using a CEX or a DEX, and ultimately minimise the risks and costs associated with slippage.
How to Set and Manage Slippage Tolerance (DEXs)
Slippage tolerance is a powerful tool provided by DEXs, giving traders control over the maximum price slippage they’re willing to accept in a transaction. It is typically shown as a percentage and is customisable before confirming a trade.
For stable and highly liquid assets (like major tokens), setting your slippage tolerance between 0.1% and 0.5% is generally effective. This low setting is usually sufficient for most trades since the risk of major price swings during execution is slight. For more volatile or lesser-known tokens—which often have less liquidity—you may need to raise your slippage tolerance to 1%, 2%, or even 3% to ensure the trade is executed.
There’s a trade-off to consider. Set slippage tolerance too low, and your transaction may fail because the price moved out of your specified range before execution was finalised. Set it too high, and you risk your order being filled at a much worse price than anticipated, especially during rapid market movements or when trading in shallow pools.
The ideal approach is to start with a low slippage tolerance and only increase it if your trades repeatedly fail to execute. Always adjust based on the asset’s liquidity, your order size, and current market volatility. Regularly reviewing your slippage settings ensures you balance successful trade execution against unwanted cost increases.
How to Minimise Slippage When Trading Crypto
Here are actionable things you can do to minimise slippage as part of your trading strategy:
Use limit orders (especially on CEXs) to lock in your price.
Trade high-liquidity asset pairs and at times of peak market activity.
Break large trades into smaller ones to reduce order book/pool impact.
Avoid trading during sudden volatility—watch for news events or sharp price moves.
On DEXs, set the lowest slippage tolerance that still allows your trade to complete.
Consider DEX aggregators—they route orders for best price across pools.
Remember, it’s impossible to avoid slippage entirely, but you can take steps to reduce its cost.
Frequently Asked Questions on Slippage in Crypto
Can you avoid slippage entirely?
No. Slippage is an inescapable part of crypto trading, but you can manage it.
What is a good slippage tolerance?
For liquid markets, 0.1%–0.5%. For volatile/illiquid assets, up to 3% may be necessary.
Why do DEXs have higher slippage than CEXs?
DEXs rely on liquidity pools, which can be shallow, unlike deep CEX order books.
What happens if your slippage is too low or too high?
Too low may mean failed trades; too high risks poor pricing.
Is slippage the same as trading fees?
No. Slippage is a price shift; fees are an explicit cost from the platform or network.
Final Thoughts on Slippage in Crypto
Understanding the definition of slippage is crucial for any crypto investor seeking consistent results. In a fast-moving market, even small differences between your intended and executed trade prices add up, gradually eroding your profits or amplifying your costs.
Slippage is an ever-present factor shaped by volatility, liquidity, order size, and execution speed—no trader is immune from its effects.
The difference between experienced investors and beginners often lies in their attention to details. Those who understand the mechanics of slippage are better equipped to forecast potential trading outcomes and make smarter, more confident decisions in the heat of the market.
With ICONOMI’s industry-leading platform, you gain access to expert tools, clear analytics, and a supportive community to guide your investment journey. Stay ahead by arming yourself with insight—start applying these slippage management strategies and see the meaningful improvement in your trading efficiency.
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