Definition
Slippage — the difference between the price you see when creating an order and the price at which the trade actually executes. Occurs due to price changes between order submission and execution.
Causes of Slippage
1. Low Liquidity
Low liquidity pool:
- $10,000 in pool
- You want to buy $1,000
- Price will shift ~10%
2. Large Order Size
Even with good liquidity:
- Pool: $1,000,000
- Order: $100,000 (10% of pool)
- Inevitable slippage
3. High Volatility
- Price changes while transaction is in mempool
- Especially relevant during news events
4. MEV Bots (Sandwich Attacks)
1. You submit a buy order
2. Bot sees your order in mempool
3. Bot buys before you (frontrun)
4. Price rises
5. Your order executes at worse price
6. Bot sells higher
Calculating Slippage
Formula:
Slippage = ((Actual price - Expected) / Expected) × 100%
Example:
Expected ETH price: $2,000
Actual price: $2,020
Slippage: ($2,020 - $2,000) / $2,000 × 100% = 1%
Slippage Across Platforms
| Platform | Slippage | Reason |
|---|---|---|
| CEX (Binance) | 0.01-0.1% | High liquidity |
| DEX (Uniswap) | 0.1-3% | AMM mechanics |
| Small tokens | 5-20% | Low liquidity |
How to Minimize Slippage
On DEX
- Set slippage limit — usually 0.5-3%
- Split your order — several small ones instead of one large
- Choose liquid pairs — ETH/USDC better than rare tokens
- Use aggregators — 1inch, Paraswap find best routes
MEV Protection
- MEV-protected RPC — Flashbots Protect, MEV Blocker
- Private transactions — not visible in public mempool
Slippage Tolerance
Maximum acceptable slippage settings:
| Value | When to use |
|---|---|
| 0.1% | Stablecoins (USDC/USDT) |
| 0.5% | Major pairs (ETH/USDC) |
| 1-3% | Volatile assets |
| 5-10% | New/illiquid tokens |
| >10% | Not recommended |
Positive Slippage
Sometimes slippage works in your favor:
Expected price: $2,000
Actual: $1,980
You got a better price!
This is possible if price moved in your direction while transaction was processing.
Slippage and DCA
For DCA investor:
On CEX
- Slippage is minimal
- Use limit orders
- Market orders on Bitcoin/Ethereum are safe
On DEX
DCA into small altcoins:
├── Regular $100-500 purchases
├── 1-3% slippage — acceptable
├── 10%+ slippage — avoid
└── Factor slippage into ROI calculations
Practical Example
DCA: $100/week into altcoin
With 5% slippage:
$100 - $5 (slippage) = $95 actually invested
Per year: $5,200 - $260 = $4,940
With 1% slippage:
$100 - $1 = $99
Per year: $5,200 - $52 = $5,148
Difference: $208 per year
Important: Slippage is a hidden fee. For DCA into illiquid assets, it can significantly reduce returns. Prefer liquid pairs or purchases on centralized exchanges.
