What is slippage?

You hit confirm at one price, but the trade goes through at another? Slippage happens because the market doesn’t freeze while you place your order.

Think of a stall at a farmers’ market: there are only a few kilos of tomatoes at the lowest price and the rest cost more. If you want a large quantity, you won’t necessarily get all of it at the price you saw first. Something similar happens when a buy order finds tokens available at different prices.

For example, you expect to buy a token at €10, but the purchase is finally executed at €10.20. That’s 2% negative slippage, not counting fees. If it were executed at €9.90, you’d have positive slippage, i.e. a better price than expected.

Why it matters

Low liquidity and fast price moves increase the chance of a gap. On an exchange, a large order can use up the quantities available at the best prices in the order book.

On a decentralized exchange (DEX), other trades can change the price before yours is executed. At the same time, the size of your own swap can move the price within the liquidity pool. This effect is called price impact and is often shown separately in the app.

What to watch out for

Slippage tolerance on a DEX sets how much unfavorable deviation from the quote you accept. It isn’t a fee, and it doesn’t mean you’ll definitely lose that percentage. If the limit is exceeded, the swap usually fails, but you may still be charged network fees.

A very high tolerance leaves room for worse execution and can make it easier for attacks in which third parties insert transactions before and after yours. We find it useful to always keep slippage, price impact and fees apart: they all affect the final amount, but they aren’t the same thing.

A limit order doesn’t allow execution at a worse price than its limit, though it doesn’t guarantee the order will be filled.