Slippage refers to the difference between your expected execution price and the actual execution price. This difference is most common when using market orders or during rapidly changing market conditions.
Table of Contents:
Why Does Slippage Occur?
The root cause of slippage is the limited depth of the order book—the quantity of orders at a certain price is fixed. When your order exceeds the available quantity at that price, the remaining portion will be executed at the next price level, and so on.
The two most common triggering scenarios are:
- Using market orders. Market orders do not specify a price and execute against existing orders in the order book sequentially, naturally starting from the best bid/ask price and extending in a less favorable price direction.
- Sharp market fluctuations. The price may have changed in the few dozen milliseconds between clicking to place the order and the order reaching the matching engine.
A Simple Example
Assume the current BTC order book sell orders are as follows:
| Price (USDT) | Quantity (BTC) |
|---|---|
| 60,000 | 0.3 |
| 60,010 | 0.5 |
| 60,030 | 1.0 |
You submit a market order to buy 1 BTC:
- 0.3 BTC executed at 60,000
- 0.5 BTC executed at 60,010
- 0.2 BTC executed at 60,030
- Average execution price ≈ 60,011 USDT
- Slippage = 60,011 − 60,000 = 11 USDT/BTC (higher than the displayed best ask price)
The larger the order and the shallower the order book, the more obvious the slippage.
How to Reduce the Impact of Slippage
| Method | Explanation |
|---|---|
| Use limit orders instead of market orders | Limit orders will not execute at a price worse than the set price, but the tradeoff is that they might not execute at all. |
| Split large orders | Divide a large order into multiple smaller orders to give the market time to replenish orders. |
| Choose trading pairs with better liquidity | Mainstream pairs and stablecoin pairs generally have better depth. |
| Avoid periods of high volatility | Volatility increases around major data releases and breaking news. |
| Monitor order book depth | Check the cumulative quantity on the opposite side before placing an order. |
Slippage vs Fees vs Spread
These three concepts are often confused:
| Term | Meaning |
|---|---|
| Fees | Charges collected by the platform based on the transaction amount, unrelated to price. |
| Spread | The difference between the current best bid and best ask prices, reflecting liquidity. |
| Slippage | The deviation of the actual execution price from the expected price, determined by order book depth. |
Frequently Asked Questions
Q1: Can limit orders experience slippage? No. Limit orders will only execute at your set price or better and will not suffer negative slippage.
Q2: Does perpvia charge slippage? No. Slippage is a result of market mechanisms, and perpvia does not profit from it.
Q3: Why is my market order execution price much worse than the displayed order price? Usually, this happens because the order size exceeds the quantity available at the best bid/ask price, and the remainder executes at less favorable prices. Checking order book depth before placing an order can help anticipate this.
Slippage is an inherent characteristic of crypto trading and cannot be completely eliminated, but choosing order types and timing wisely can significantly reduce its impact.