Everyone who has ever traded financial assets must be aware of slippage. In fact, it has affected us at some point. Unfortunately, the issue is more pronounced in crypto.
So what is slippage in cryptocurrency? It refers to the price differences of the order when placed and when it executes.
What is a Slippage?
Generally, investors have a certain price in mind when trading. After all, you can never open a chart and start trading with no goal. When trading, investors want to purchase or sell at a certain price, which rarely happens thanks to slippage. Slippage can either be positive or negative.
When it occurs, traders have to settle for the execution price instead of their preferred price. Slippage is the outcome of a price shift in a highly volatile market.
Positive slippage gives you an advantage since you get a better price when the order is executed than the one you placed. But in crypto what is slippage?
What is Slippage in Crypto?
Slippage occurs when you sell or purchase an asset for more or less than what you expected. It’s the difference between the cryptos’ actual price and the trader’s expected price.
Slippage in crypto is quite common. And that’s because cryptocurrency trading is a highly volatile market.
The fact that the market moves quickly means the price might change between when you place your order and when it executes. Therefore, you may end up selling or buying at a lower or higher price than what you intended.
Slippage crypto pertains to the difference between what you wanted and what you have to settle for.
How does Slippage Work?
Generally, slippage can be split into two classes (negative and positive) that can affect your strategies.
For sell orders, it can be positive if the final price exceeds the order price. This lets traders earn more when selling. When it’s negative, the execution price falls short of what you expected.
For buy orders, slippage is considered positive when the final prices are a few pips lower than the ordered price. A positive slippage can give investors a better purchasing rate. So what does slippage mean in crypto? Well, depending on the market’s volatility, it can mean a great loss or great gain.
