Imagine you order hamburgers for delivery. The price shown on the app is $10, but when your order is processed and confirmed, the price is now $10.5 because there was an offer that just ended at that moment. That minimal “$0.50 adjustment” would be slippage.
In trading, slippage is precisely the difference between the price you expected to get for your order and the actual price you obtain. It’s that small detail that can add up or subtract in a matter of seconds.
This is something very common and significant, especially in volatile markets like cryptocurrencies, where prices change in the blink of an eye.
Slippage can be positive because you get a better price than you expected, but clearly, the opposite can also happen. Understanding it is key, without a doubt, because it gives you control, allows you to know what is happening, how to handle it, and how to make better decisions. If you know what it is, you can decide better.
Why does slippage occur? Key factors in 2025
The main causes of slippage are speed, market instability, and high volatility, where prices are highly changeable. It could happen like this: you’re in a supermarket, you see the price of a product on the shelf, but when you get to the checkout counter ready to pay, the price has already changed. Oh, surprise!
There is another determining factor, according to Coinbase, and that is low liquidity: if there are not enough buyers or sellers willing to trade at a specific price, the order must be “filled” with another price in order to be completed.
In 2025, these factors have been accentuated with the growth of new platforms and trading automation. Currently, high-frequency technology and algorithms are so fast that they have the capacity to energize the market in less than a second, making slippage more likely.
There are also market events, such as the rapid adoption of digital assets or unexpected economic news, which can generate sudden peaks of volatility.
For example, imagine you are trying to sell your tickets for a concert by a recognized band at a certain price, but just as you confirm the sale, it is reported that the band’s tour was canceled. The market becomes flooded with people trying to sell their tickets, and suddenly, your sale happens at a much lower price. Understanding these causes gives you the opportunity to better anticipate and manage risk.
Types of slippage: Good, bad… or does it depend?
According to Coinbase, there are two types of slippage: positive and negative. Negative slippage is the one that harms you and is usually the most common. It occurs when the price of your trade is worse than you expected.
If you want to buy a cryptocurrency for $100 but the transaction goes through for $101, you have had a negative slippage of $1. It’s something like when you are going to buy a plane ticket and the price increases just before you finish the transaction.
The counterpart is positive slippage, and it’s precisely that stroke of luck that will surely make you very happy. It occurs when your trade goes through at a better price than you expected.
If you want to sell a stock for $50 and, due to a rapid market movement, it sells for $51, you are having a positive slippage of $1. Don’t believe that the unexpected will always be bad: the market will sometimes show its teeth, but this time with a big smile.
How does slippage affect your trades?
Slippage has a direct impact on the profitability of a trade by generating a difference between the expected price and the executed price. Although it may seem minimal, this small percentage can lead to substantial losses, especially in high-volume trades.
Imagine you place a purchase order for $10,000 in Bitcoin and have a negative slippage of 0.5%, you will instantly lose $50. What a pain for your wallet! If you trade frequently, these “cents” accumulate and can impact your gains or deepen your losses. A cent today, many times, adds up to much more than you think.
Slippage and its impact are not limited to the cryptocurrency sphere. The high volatility of this market makes it more visible, but it affects other financial markets:
- Forex: in the foreign exchange market, slippage is frequent during relevant economic announcements, such as the publication of employment data or interest rate decisions, which generate substantial movements in prices.
- Stocks and futures: Corporate surprises, such as merger announcements or unexpected earnings reports, are often a trigger for slippage. The same happens in moments of collective panic, where the massive reaction of investors causes a mismatch between the buy and sell prices.
How to minimize slippage in 2025: tricks and solutions
There is a good way to reduce slippage, and that is by using limited orders. According to Coinbase, instead of launching an order at market price, a limited order gives you the option to set a maximum buy price or a minimum sell price. Imagine you put a cap on your spending in an app: if the price increases above your limit, the order does not go through, and thus you will avoid unpleasant surprises.
3 tricks to reduce slippage:
- Choose the precise moment: avoid trading during high volatility events, such as important press releases or at the close of markets. Be the best friend of calm!
- Select platforms with high liquidity: when platforms have a large volume of operations, they have more buyers and sellers, which ensures that orders go through at prices closer to what you expect.
- Try to configure a slippage tolerance: generally, decentralized platforms (DeFi) give you the opportunity to establish what maximum displacement percentage you are willing to accept. If the price varies more than planned, the transaction is not executed.
Frequently asked questions about slippage in trading
Is slippage always bad?
No. It can be positive or negative. According to Coinbase, positive slippage occurs when the trade goes through at a better price than expected. On the contrary, in negative slippage, the price is worse than you expected and you have losses. It is a neutral market phenomenon, and the final result is subject to the direction in which the price moves at the exact moment your trade goes through.
Which markets have more slippage today?
The markets most prone to slippage are those with higher volatility and lower liquidity. The cryptocurrency market is a clear example of this. According to Coinbase, tokens that have lower capitalization have higher slippage than major ones like Bitcoin or Ethereum.
How do you determine if a platform effectively manages slippage?
According to Kraken, when a platform is trustworthy, it will allow you to set a “slippage tolerance” and you will be able to decide how much displacement you are willing to accept. Additionally, it is recommended to investigate the platform’s liquidity, as the higher it is, the lower the slippage will be.
Conclusion: master it and make it your ally
At the end of the day, slippage is not an enemy, but a natural part of the game that you must learn to have under control. Do not see it as an unpredictable obstacle, but rather assimilate it as one more variable in your trading strategy.
Knowing how it works will give you power and allow you to make informed decisions, establishing limits and choosing appropriate tools to carry out your trades.
Your crypto, your rules. With this knowledge, you have the autonomy in your hands to minimize risks and even take advantage of the opportunities that are presented to you. Don’t let the market take you by surprise. Start trading informed in just 3 minutes. Discover Bitnovo now!
