Slippage (slippage) is the discrepancy between the price the trader saw at the moment of sending the order and the real price at which the order was actually executed. The phenomenon is most often observed when using market orders, since such an order is executed against the nearest available offers in the order book rather than at a fixed value.
The main cause of slippage is a change in the market situation within fractions of a second between sending and executing the order, as well as insufficient liquidity of the trading pair. If there are few opposing orders of the required volume in the book, a large order "eats up" several price levels and on average is executed worse than expected. Slippage can be negative (the price worsened) or positive (the execution turned out to be more favorable).
How to reduce slippage
- use limit orders instead of market ones;
- trade pairs with high liquidity and a narrow spread;
- split large orders into parts;
- set an acceptable slippage percentage if the platform allows it.
Understanding this mechanism helps you assess trading costs more realistically and plan your trading strategy more precisely, especially during high volatility.
