What is Slippage?
The difference between the price you expect to pay for a crypto trade and the actual price you receive.
What is Slippage?
Slippage is the difference between the price you see when you place a trade and the price at which the trade actually executes. It commonly happens when you trade large amounts on a decentralized exchange (DEX), or when a token has low trading volume and thin liquidity.
Why Does Slippage Happen?
On a DEX like Uniswap, prices are determined by a mathematical formula based on the ratio of tokens in a liquidity pool, not by matching buyers and sellers. When you buy a large amount of a token:
- You deplete one side of the pool, causing the price to move against you.
- Other trades may happen in the same block before yours (see: MEV).
- Network congestion can delay your transaction, during which prices change.
Slippage Tolerance Setting
Most DEXs let you set a "slippage tolerance" - the maximum percentage difference you are willing to accept. If you set 0.5% slippage tolerance and the price moves more than 0.5% by the time your transaction executes, it will automatically cancel and refund your gas fees.
- Low slippage (0.1%-0.5%): Best for high-liquidity pairs like ETH/USDT. Your trade may fail more often.
- Higher slippage (1%-3%): Needed for small-cap or new tokens. Increases risk of a worse price.
- Very high slippage (5%+): Common with meme coins. You may lose significant value.
Slippage on Indian Exchanges
On centralized exchanges like CoinDCX or Binance, slippage is less of a concern because they use order books with real buyers and sellers. However, if you are trading a low-volume altcoin on these platforms, you may still experience price impact when placing large market orders.
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