Slippage
Slippage is the difference between the price a trader expects and the price actually filled. It happens when an order moves through the available liquidity — larger orders, thin order books, and fast-moving or low-liquidity markets all widen the gap between the quoted price and the executed price.
How it works
An order fills against the best available prices until it is complete. If liquidity at the top of the book is thin, a large order eats into worse prices as it fills, so the average execution drifts away from the quote. On an automated market maker (AMM), the same effect is called price impact — the deeper the pool, the smaller the impact for a given trade size.
How to read and control it
Traders set a slippage tolerance — the maximum adverse move they will accept before the trade reverts. Deep liquidity and smaller orders keep realized slippage low; splitting a large order into pieces or using limit orders reduces it further. Positive slippage, where you fill better than quoted, is also possible in fast markets.
Why it matters
Slippage is a real, often underestimated trading cost — on thin altcoins or in volatile conditions it can dwarf the exchange fee. On-chain it compounds with gas, and a high slippage tolerance on a public mempool invites sandwich attacks.
Common misreads
Slippage tolerance is a ceiling, not the slippage you will actually pay. It is distinct from the spread and from fees, though all three erode execution. And setting tolerance too high to force a fill is exactly what MEV bots exploit to sandwich your trade.