What Is Slippage in Crypto? Slippage vs Price Impact Explained
Slippage is the gap between the price you expect and the price you get. Learn how order books and AMM pools cause price impact, with examples and fixes.
Updated
Slippage is the difference between the price you expect to pay or receive for a trade and the average price at which it actually fills. It can work for or against you, but on large market orders it is almost always a cost. For arbitrage and funding strategies, slippage is often the cost that decides whether a trade is profitable.
Key takeaways
- Slippage = expected price − actual average fill price, usually shown as a percentage.
- Price impact is the part caused by your own order eating through liquidity.
- On order books, slippage depends on depth; on AMM DEXs, it depends on pool size.
- Market orders pay slippage; limit orders cap it but may not fill.
- Slippage applies on every leg of an arbitrage trade.
Why slippage happens
There are two main causes:
- Price impact: your order is larger than the liquidity at the best price, so it fills at progressively worse prices.
- Latency: the market moves between the moment you see a price and the moment your order executes. This is common in fast markets and on blockchains, where a transaction waits to be included in a block.
Slippage on an order book
On a centralized exchange, a market buy fills against the asks in the order book, starting at the lowest price. Suppose you want to buy 5,000 units of a token and the book looks like this:
| Ask price | Size available | You fill | Cost |
|---|---|---|---|
| $100.00 | 1,000 | 1,000 | $100,000 |
| $100.10 | 2,000 | 2,000 | $200,200 |
| $100.30 | 3,000 | 2,000 | $200,600 |
| Total | 5,000 | $500,800 |
Your average price is $500,800 ÷ 5,000 = $100.16. You expected $100.00, so slippage is $0.16 per unit, or 0.16%, which is $800 on the whole order. A trade with a 0.30% gross edge would lose more than half of it here, before any trading fees.
Price impact on an AMM DEX
Many decentralized exchanges use automated market maker (AMM) pools instead of order books. A basic constant-product pool keeps x × y = k, where x and y are the two token balances.
Example: a pool holds 100 ETH and 300,000 USDC, so the price is $3,000 and k = 30,000,000. To buy 1 ETH:
- ETH left in the pool: 99
- USDC needed in the pool: 30,000,000 ÷ 99 = 303,030.30
- You pay: 303,030.30 − 300,000 = $3,030.30 before the pool fee
That is about 1.01% price impact for buying 1% of the pool. Larger pools give lower impact for the same trade size. DEX interfaces usually show the estimated price impact before you confirm.
Slippage tolerance and MEV
On DEXs you set a slippage tolerance, for example 0.5%. If the price moves more than that before your transaction is included, it fails and you usually still pay gas. A very high tolerance protects against failed trades but invites sandwich attacks, where a bot trades just before and after you to profit from the price move your order creates. This is one form of MEV (maximal extractable value).
How to reduce slippage
| Method | Why it helps | Trade-off |
|---|---|---|
| Trade liquid markets | More size at each price level | Fewer opportunities |
| Use limit orders | You never fill worse than your price | May not fill |
| Split large orders | Each piece consumes less depth | Price may move between pieces |
| Check depth first | Know the cost before trading | Takes time |
| Use DEX aggregators | Route across several pools | Extra gas, smart contract risk |
| Set tight DEX tolerance | Blocks bad fills and sandwiches | More failed transactions |
Slippage in arbitrage
An arbitrage trade has at least two legs, and each one can slip. A spread that looks profitable at the top of the book can disappear once you size up. ArbTide shows the size available at the best price for each route on the live arbitrage scanner. To estimate net profit including slippage and fees, use the arbitrage profit calculator.
Frequently asked questions
- What is slippage in crypto?
- Slippage is the difference between the price you expect when you place a trade and the average price you actually get. It happens because prices move and because large orders consume liquidity at several price levels.
- What is the difference between slippage and price impact?
- Price impact is the part of slippage caused by your own order moving the price as it fills. Slippage also includes price changes caused by other traders between the moment you submit an order and the moment it executes.
- What is slippage tolerance?
- Slippage tolerance is a setting on decentralized exchanges that sets the maximum price change you accept. If the final price is worse than that limit, the transaction fails instead of filling at a bad price.
- How can I reduce slippage?
- Trade in more liquid markets, split large orders into smaller ones, use limit orders instead of market orders, and check the order book depth or DEX price impact before you trade.