What is ‘slippage’ in cryptocurrency, and why does it matter?
Hey monsters, it’s time for another #LiquidLearning article! Today we’ll cover a term you’ve probably heard before; Slippage. So why does it matter?
Slippage is what describes the efficiency of an executed trade. When you place a trade, you expect it to occur at a set price; however, due to a few underlying factors, this price can change slightly before the trade has been completed. This difference between the expected price and the final settlement price is slippage. It happens regardless of if a transaction is buying or selling an underlying asset. Slippage can occur in all types of markets — Equities and Bonds are also no stranger to slippage. However, it is much more prevalent in crypto markets due to the asset class’s extreme movements.
Setting slippage
When you trade on a sexy DEX such as ApeSwap.finance, the default slippage is set to 0.5%. This can be adjusted on the fly and will allow you to set a tolerated level of slippage in order to complete the trade. If the trade cannot be completed without exceeding this acceptable level of slippage, then it fails.
Can I avoid slippage?
So you’ve got this far and just want to know how you can avoid this nuisance. Unfortunately, slippage is here to stay and something we all have to deal with, but there are a few tricks you can use to keep it to a minimum.
- Trade assets with high liquidity. High Liquidity = Low Slippage
- Check out the price impact and split larger orders over time.
- Avoid trading during volatile moves.
To summarise, slippage is commonplace within the crypto ecosystem and is something to consider before completing a transaction to maximize your returns and avoid miscalculated losses.
Thanks for reading monsters!
We hope this article was useful to you and you have picked up some valuable knowledge to aid in your crypto adventure!
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