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Thirsty for some Tech Thursday? We got you covered. This week, we’re serving up an explanation of slippage. What is slippage? Why should you care? How can you avoid slippage?
What is Slippage?
Slippage is the difference between how much you expect a trade to cost, versus how much it actually costs by the time it executes. Depending on market activity (how many trades are taking place and price changes of the assets you’re trading), the cost of your trade can change from the time you begin the transaction to its completion. Crypto moves fast, so slippage is a pretty common occurrence.
Why does Slippage occur?
Usually slippage is a problem when liquidity is low. When crypto users make trades in a shallow liquidity pool, or one with a low value of assets, price impact is higher. Essentially, the fewer assets in a pool, the greater the price will vary when trading activity increases.
Why should you care?
Slippage can be good or bad for your trades. Sometimes traders end up buying at a better price than they expected, positive slippage, and sometimes it’s more expensive, negative slippage. If you’re selling, the price going up before trade execution would be positive, and when the buyer benefits from a price drop, sellers experience negative slippage. Slippage can happen in any…
