What is Slippage in Crypto? The Essential Guide to Understanding Price Discrepancy in Trading

When people start trading digital coins, one of the first confusing questions is, “What is slippage in crypto?” Many traders notice that the price they see on the screen is not always the price they actually get after their order is filled. This difference can be small, but over time, it can change profits and losses in a big way.

Slippage is not a bug in the system. It is a normal part of every open market, including crypto. It shows up when the market moves between the time a trader clicks “buy” or “sell” and the time the trade is completed on the exchange or on a DeFi platform. Slippage can be helpful or harmful, but most of the time, traders only notice it when it hurts their results.

This article explains what slippage is, why it happens, how it works in both centralized and decentralized exchanges, and what simple steps can help reduce it. The goal is to keep the language clear and simple, so any reader who is new to trading can understand and use this knowledge in real trades.

What Is Slippage in Crypto?

To answer the question “what is slippage in crypto?” start with the basic idea. Slippage is the difference between the expected price of a trade and the actual price when the trade is executed.

• Expected price: the price shown when a trader presses “buy” or “sell.”
• Actual price: the price at which the order is filled on the market.

If the actual price is worse than expected (for example, higher when buying or lower when selling), this is called negative slippage. If the actual price is better than expected (lower when buying or higher when selling), this is called positive slippage.

In crypto, prices can change very fast. Many coins are also thinly traded, which means there are not many buyers and sellers at each price. Because of this, even a simple market order can move through several price levels while it is being filled. The final result is the difference between the price a trader hoped for and the price the trade actually gets.

Here is a simple example:

• A trader wants to buy 1 ETH.
• The current visible price is 3,000 USDT.
• While the order is being processed, buyers push the price up to 3,010 USDT.
• The order is filled at 3,010 USDT instead of 3,000 USDT.

The 10 USDT difference between the expected and actual price is slippage. In this case, it is negative slippage, because the trader pays more than expected.

Slippage is not always large, but it is always present in markets where prices move and liquidity changes. Over many trades, it can slowly reduce profits or increase losses if it is not managed well.

How Slippage Works When You Place a Trade

To understand slippage in crypto, it helps to look at what happens behind the screen when a trade is sent to an exchange or a DeFi protocol.

1. Order Types and Slippage

There are two main order types that matter for slippage:

Market Orders

• A market order tells the exchange to fill the trade now, at the best prices available.
• It does not control the exact price.
• Market orders are more likely to have slippage, especially in fast or thin markets.

Limit Orders

• A limit order tells the exchange to fill the trade only at a price that is equal to or better than the chosen limit price.
• If the market moves away from that price, the order may not be filled at all.
• Limit orders help reduce slippage, but there is a chance the order stays open and never trades.

When a trader uses a market order, the exchange must match it with orders on the order book. If there is not enough volume at the best price, the order “eats” through higher prices (for buys) or lower prices (for sells). This process creates slippage.

2. Order Books vs. Liquidity Pools

Slippage works slightly differently in centralized exchanges and decentralized exchanges:

Centralized exchanges (CEXs) use order books.

• Buyers and sellers place limit orders at different prices.
• A market order matches these limit orders from the top of the book downward (for a buy) or upward (for a sell).
• Slippage happens when the order needs to match several levels to fill the full amount.

Decentralized exchanges (DEXs) often use automated market makers (AMMs) with liquidity pools.

• Prices are set by a formula that depends on the ratio of the tokens in the pool.
• Large trades change that ratio and move the price.
• Slippage here comes from the price impact of the trade on the pool, not from a list of individual orders.

So on a DEX, when someone asks “what is slippage in crypto?” the answer includes both the market movement and the pool pricing formula. On CEXs, the answer focuses more on the order book and available volume at each price level.

3. Time Delay and Volatility

Slippage becomes worse when there is a delay between the moment the trade is sent and the moment it is confirmed. In crypto, this delay can come from:

• Network congestion (for example, slow block confirmation).
• A DEX transaction waiting in the mempool before miners or validators include it.
• Exchange system load during high volume periods.

During this delay, the price can move. If the market is very volatile, even a few seconds can cause a big gap between the expected and final price.

Also Read: Top 10 Cryptocurrency Prime Brokerages to Consider in 2025 (Platforms Compared)

Types of Slippage: Positive, Negative, and Zero

Not all slippage is bad. Slippage has different forms, and understanding them helps a trader stay calm when the final price is not exactly the same as the price first seen.

Overview of Slippage Types

Here is a simple table that shows the three main types of slippage and what they mean for a trader:

Positive Slippage

Positive slippage happens when the market moves in a way that favors the trader during the short time between order creation and execution.

Example:

• A trader wants to buy 1 BTC at the visible price of 40,000 USDT.
• Before the order fills, a seller places a big order at 39,900 USDT.
• The trade executes at 39,900 instead of 40,000.

In this case, the trader pays less than expected. The 100 USDT improvement is positive slippage.

Positive slippage feels good, but it is less common than negative slippage in fast, rising markets. This is because many traders are racing to buy, which pushes prices up.

Negative Slippage

Negative slippage is the type that most traders worry about. It happens when the market moves against the trade during the execution time.

Example:

• A trader wants to sell 2 ETH at 3,000 USDT each.
• There is not enough buy volume at 3,000, so the order also fills at 2,995 and 2,990.
• The average fill price becomes 2,995 instead of 3,000.

Here the trader receives less money than expected. The difference is negative slippage.

Negative slippage is more likely in:

• Very volatile markets.
• Low-liquidity coins or trading pairs.
• Periods of news events or big price shocks.

Zero Slippage

Sometimes, the market barely moves while the order is filled. In this case, the expected price and actual price are the same. This is called zero slippage.

Zero slippage is more likely when:

• Trading major coins with deep order books (for example, BTC/USDT).
• Using small order sizes.
• The market is quiet and stable.

Main Causes of Slippage in Crypto Trading

To manage slippage, it is important to know what causes it. Slippage is not random. It comes from specific factors in the market and in the trading setup.

1. Market Volatility

Crypto prices can change very quickly. Sudden buying or selling can move the price within seconds or even milliseconds. When the price changes between the time an order is sent and the time it is filled, slippage appears.

High volatility often occurs:

• Around major news events.
• During large liquidations in futures markets.
• When a coin is listed or delisted.
• When “whales” (very large traders) move large amounts.

In short, the more the price jumps around, the higher the chance of both positive and negative slippage.

2. Low Liquidity

Liquidity is the ability to buy or sell an asset without causing a big change in its price. In practice, high liquidity means there are many orders waiting at many price levels, or large pools of tokens available.

Low liquidity causes slippage because:

• There are not many buyers and sellers at each price.
• A medium or large market order will “eat” through the available volume at the best prices.
• The order must move to worse prices to find enough volume to fill the full amount.

This is especially true for:

• Small altcoins.
• New tokens with few holders.
• Exotic trading pairs (for example, small coin to another small coin).

3. Order Size

The size of the order also has a big impact on slippage. A very large order will often create more slippage than a small order, especially in low-liquidity markets.

Imagine a pool with only 100,000 USDT worth of liquidity near the current price. A 1,000 USDT trade might create almost no price impact. A 50,000 USDT trade, however, might move the price significantly because it takes a big part of the available liquidity.

On order book exchanges, a large order might clear several levels of the order book. On AMM DEXs, a large order might change the token ratio in the pool and move the price a lot.

4. Trading Fees and Gas Costs

While trading fees and gas costs are not slippage by themselves, they affect the effective price of a trade. When someone asks “what is slippage in crypto?” it is good to include the idea of “total cost of the trade,” which combines:

• Price impact (real slippage).
• Exchange trading fees.
• Network gas fees for transfers and DEX swaps.

If a trade has small slippage but very high gas fees, the final result can still be worse than expected. Some traders think of all these costs together when they judge whether their trade was “good” or “bad.”

5. Network Congestion and Delay

On chains with high traffic, transactions may wait in the mempool for some time before they are included in a block. During this delay, the market price can change.

For example:

• A trader sends a swap transaction on a DEX.
• The gas fee is set too low.
• Miners or validators choose other transactions first.
• By the time the trade is confirmed, the price has moved, leading to slippage.

Because of this, confirmation time is a real factor in slippage, especially on busy networks when many people are trading at once.

Also Read: Market Maker in Crypto: Core Strategies, Hedging Tactics, and Inventory Control Explained

How to Reduce Slippage and Protect Your Trades

Slippage cannot be fully removed, but it can be managed. This section shows practical steps that traders can use to reduce the risk of harmful slippage.

1. Use Limit Orders Instead of Market Orders

The simplest way to control slippage is to use limit orders when possible.

With a limit order, a trader:

• Chooses a maximum price to pay when buying.
• Chooses a minimum price to receive when selling.

If the market price moves past this level, the order will not fill. This protects the trader from very bad fills, but it also means the trader might miss the trade if the market never returns to the limit price.

Limit orders are helpful when:

• The market is very volatile.
• The trader is not in a hurry.
• The trader wants to control the exact entry or exit price.

2. Adjust Slippage Tolerance Settings on DEXs

On decentralized exchanges that use AMMs, the trading interface usually has a slippage tolerance setting. This setting tells the protocol the maximum difference between the expected price and the actual price that the trader is willing to accept.

Typical ranges:

• 0.1% or 0.5% for stable or large coins.
• 1% to 3% for more volatile or low-liquidity coins.
• Higher percentages for very thin markets, but with more risk.

Here is a simple table that shows how different settings can affect the trade outcome:

A low slippage tolerance protects against bad prices but can cause more failed transactions. A high slippage tolerance reduces failed trades but allows more negative slippage. Each trader must choose a balance that fits their risk level.

3. Break Large Orders Into Smaller Parts

Large orders can create strong slippage. One way to reduce this is to break a large order into several smaller trades.

For example:

• Instead of buying 10 BTC in one order, a trader might buy 2 BTC five times.
• Each smaller order creates less price impact.
• The average price across all orders may be closer to the expected price.

This approach is especially useful in low-liquidity markets, where a single very large trade could move the price a lot.

4. Trade During High-Liquidity Periods

Slippage is usually lower when:

• More traders are active.
• Order books are deeper.
• Liquidity pools are more balanced.

For many markets, this happens during times when major regions are awake and active, such as overlapping trading hours for large economies.

Trading during quiet hours, when fewer people are active, can increase slippage, especially for smaller coins. So one simple way to manage slippage is to avoid trading very large amounts when the market is empty.

5. Choose Pairs and Platforms with Deep Liquidity

When possible, trade on platforms and in pairs with deep liquidity. For example:

• Use major trading pairs such as BTC/USDT, ETH/USDT, or stablecoin pairs when they fit the strategy.
• Use well-known exchanges and DEXs with strong volume and large liquidity pools.
• Avoid very small pools or order books with big gaps between prices when trading large amounts.

Before trading a new token, it often helps to check:

• The 24-hour volume.
• The size of the top buy and sell orders on the order book.
• The total liquidity in the DEX pool.

If these numbers are very low, slippage can be a serious problem.

6. Watch Gas Fees and Network Speed

On DEXs and smart contract platforms, gas fees and network speed matter. To reduce slippage from slow confirmation:

• Avoid sending trades when the network is heavily congested if possible.
• Set a gas fee that is high enough for the transaction to confirm in a reasonable time.
• Check recent gas prices and normal confirmation times before trading.

While this will not remove price movement, it helps limit the time window in which the price can change.

Conclusion

Slippage is a key concept for anyone who wants to understand what is slippage in crypto? and how it shapes real trading results. It is the difference between the expected price and the actual price of a trade, caused by market movement, low liquidity, order size, and network delay. Slippage can be positive, negative, or zero, but traders usually remember the times when it works against them.

This article showed how slippage appears in both centralized and decentralized exchanges, how order types like market and limit orders affect it, and how AMM liquidity pools create price impact. It also explained the main causes of slippage, including volatility, low liquidity, large trade size, and network congestion. With this understanding, traders can see that slippage is not random; it follows clear rules based on market structure.

Finally, this article shared several simple ways to reduce and manage slippage: using limit orders, adjusting slippage tolerance on DEXs, breaking large orders into smaller ones, trading in high-liquidity periods, choosing deep markets, and watching gas fees and network speed. Slippage will always exist in crypto markets, but with the right habits and tools, traders can control it and protect their capital, leading to more stable and confident trading over time.