Slippage
Definition
The difference between the expected price of a trade and the actual execution price, typically occurring during high volatility or with large orders in thin markets.
Slippage occurs when your trade executes at a different price than you intended. If you place a market buy order when a stock shows $50.00, but it executes at $50.15, you experienced $0.15 of slippage. This can happen in both directions — positive slippage (better than expected) and negative slippage (worse than expected).
The causes of slippage include: market volatility (prices move between order placement and execution), large order sizes (your order depletes available liquidity at the best price), low liquidity (few orders on the book near the current price), and network latency (delay between your order and exchange receipt).
Slippage is particularly significant in cryptocurrency trading. DeFi protocols like Uniswap operate with automated market makers where the price moves with each trade. A large swap on a pool with limited liquidity can experience several percent slippage. Most DEX interfaces show an estimated slippage and let you set a maximum slippage tolerance.
To minimize slippage: use limit orders instead of market orders, trade during high-liquidity periods (market hours for stocks, active periods for crypto), break large orders into smaller pieces, and check the order book depth before placing large orders.
For portfolio tracking and tax purposes, the actual execution price (including slippage) is what matters — not your intended price. Transaction records from exchanges include the actual fill price, and this is the basis for calculating gains and losses.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
How do I reduce slippage on DEX trades?
Set a slippage tolerance (1-3% for major tokens, higher for low-liquidity tokens). Trade on DEXs with deeper liquidity (Uniswap for Ethereum, Raydium for Solana). Split large trades into smaller amounts. Use DEX aggregators like 1inch that route across multiple pools for better prices.
Is slippage always bad?
No — slippage can be positive (getting a better price than expected). However, the structural forces of markets mean negative slippage is more common, especially for market orders. Limit orders eliminate the possibility of negative slippage at the cost of potentially not filling.