rewrite this title What Is Price Slippage in Crypto & How Can You Avoid It

Ever placed a crypto trade only to find the price changed before execution? That’s price slippage– a hidden cost that can eat into your profits. It is a common issue traders face in fast-moving or low-liquidity markets like the crypto market. 

Price slippage occurs when market conditions shift between the time you place an order and when it gets executed, causing you to pay more (or receive less) than anticipated. It is common in both spot trading and DeFi swaps, especially during times of high volatility or low liquidity. While some degree of slippage is unavoidable, understanding how it works and learning how to manage it can help you trade more efficiently and protect your assets.

In this article, we’ll explain why price slippage happens, types, and the best strategies to minimize or avoid its impact.

Why Does Slippage Occur?

These factors cause price slippage to happen during crypto trading. T

Crypto markets are notorious for their wild price fluctuations. If an asset’s price is rapidly increasing or decreasing, the price may change in the few seconds it takes for your trade to be processed.

For example, if you are trying to buy Ethereum (ETH) at $3,000, but just as your order is being executed, a wave of new buyers pushes the price to $3,020. You end up paying more than you originally planned, this is slippage in action.

The more volatile an asset is, the more likely you’ll experience slippage, especially during market-moving events like big announcements, regulatory news, or Bitcoin halving cycles.

Low Liquidity (Not Enough Buy/Sell Orders)

Liquidity refers to how easily you can buy or sell an asset without affecting its price. In a high-liquidity market, there are plenty of buyers and sellers, so orders get filled at the expected price. But in a low-liquidity market, there aren’t enough buy or sell orders to match every trade instantly, leading to slippage.

For example, if you buy 100,000 DOGE on a smaller exchange with low liquidity, there might not be enough sellers offering DOGE at your desired price. Instead, your order will get filled at higher prices, causing you to pay more than expected.

This is common in DeFi swaps, where liquidity pools determine trade execution. If a pool has low reserves, a single large trade can significantly shift prices, leading to major slippage.

When you place a large trade, your order might not be filled at a single price because there aren’t enough matching orders available. Instead, your trade gets executed in parts, filling at multiple price points as the market adjusts.

For example, if you try to sell 5 BTC on an exchange with limited buy orders at your desired price, your BTC may be sold at progressively lower prices as buyers at higher price levels are exhausted. This is called “slippage due to order book depth”, and it’s a big issue for traders dealing with illiquid crypto pairs.

Institutional investors or whales (large holders of crypto) often use strategies like OTC (over-the-counter) trading or limit orders to avoid moving the market too much with their large orders.

Delayed Transactions & Network Congestion 

Crypto transactions don’t always go through instantly, especially in high-demand periods when networks are congested. If a trade takes too long to confirm, the market price might shift before your order is executed.

For example, if you submit a swap on Uniswap when Ethereum’s gas fees are high, your transaction might be delayed. By the time it is processed, the token price may have changed, leading to slippage.

This is especially problematic in DeFi, where blockchain confirmation times and fluctuating gas fees can cause unexpected price movements before a trade settles.

Types of Price Slippage in Crypto

Slippage isn’t always bad. It can work for or against you depending on how prices move while your order is being executed. There are two main types of slippage:

Positive Slippage: Getting a Better Deal

Positive slippage happens when your trade executes at a better price than expected. This means you either buy at a lower price or sell at a higher price, increasing your profits.

For example, let’s say you place a market order to buy 1 ETH at $3,000, but by the time your order goes through, the price has dropped to $2,980. You end up paying $20 less than expected. This is positive slippage working in your favour.

Positive slippage is less common but can happen in fast-moving markets where prices are dropping or when liquidity increases suddenly (for example, if a big seller enters the market).

Negative Slippage: Paying More or Selling for Less

Negative slippage is the most common type of slippage and happens when your trade executes at a worse price than expected. This means you either buy at a higher price or sell at a lower price, reducing your potential profit or increasing costs.

For example, if you place a market order to buy 1 ETH at $3,000, but by the time it’s executed, the price has jumped to $3,020, you’ll have to pay $20 more than expected. That’s negative slippage in action.

Negative slippage is more frequent in volatile markets, low-liquidity trading pairs, or during network congestion when transactions take longer to process.

How to Minimize or Avoid Price Slippage

Slippage is a normal part of trading, but you don’t have to accept it blindly. By using the right strategies, you can reduce its impact and keep your trades as close to your intended price as possible.

Use Limit Orders Instead of Market Orders

A market order executes immediately at the best available price, which can lead to unexpected slippage, especially in volatile or low-liquidity market cycles.

Instead, use a limit order, which only executes at your specified price (or better). For example, if you want to buy 1 ETH at $3,000, a limit order ensures you won’t pay more than that, even if prices move quickly. It’s best for preventing negative slippage and controlling your execution price.

RELATED: Emotional Trading: How to Navigate Market Cycles with Confidence

Trade in High-Liquidity Markets

Higher liquidity means more buyers and sellers, reducing the chance of price swings between order placement and execution.

Stick to major exchanges (like Binance, Coinbase, or Kraken) and deep liquidity pools in DeFi (like Uniswap’s most popular trading pairs). The more liquidity, the less likely your trade will cause a big price movement. You can use this technique to reduce slippage in both spot and DeFi trading.

Adjust Slippage Tolerance on DeFi Platforms

Decentralized exchanges (DEXs) like Uniswap and PancakeSwap let you adjust slippage tolerance, which determines how much price movement you’re willing to accept before your order is cancelled.

A low slippage tolerance (e.g., 0.1%) minimizes losses but may cause your order to fail if the market moves too quickly. A higher tolerance (e.g., 2-3%) ensures execution but increases the risk of negative slippage.

Finding the right balance is key. Start low and adjust as needed. It’s ideal for controlling price execution in DeFi trades.

Avoid Trading During High Volatility

Major market events, like token launches, economic reports, or sudden crypto news—can cause wild price swings, increasing the risk of slippage.

If you don’t need to trade during these periods, wait until the market stabilizes to get a more predictable execution price. Use this strategy to avoid extreme slippage during sudden price movements.

Break Large Orders Into Smaller Trades

Placing a large order on an illiquid trading pair can move the market, causing you to pay more (or sell for less) than expected.

Instead of buying or selling everything at once, split your trade into smaller chunks to minimize the price impact. Some exchanges and trading bots even allow automated order execution to handle this for you. It’s best for preventing slippage on large trades.

Use Slippage Protection Tools

Some exchanges offer built-in slippage protection that helps ensure your trade executes close to your expected price.

For example, exchanges like Binance and Bybit have “price protection” features, and advanced trading platforms offer tools like TWAP (Time-Weighted Average Price) or VWAP (Volume-Weighted Average Price) to reduce slippage on large orders. Traders looking for additional safeguards against slippage can use this strategy for success.

Final Thoughts

The key to managing slippage effectively is understanding market conditions and execution methods.

Trading in high-liquidity markets, such as major exchanges or deep liquidity pools, helps ensure that your orders are filled with minimal price deviation. If you’re using DEXs like Uniswap or PancakeSwap, adjusting your slippage tolerance settings can prevent costly surprises. Additionally, timing plays a crucial role—trading during periods of high volatility, such as major news events or token launches, can increase the risk of negative slippage. 

For those executing large trades, breaking them into smaller transactions can help prevent drastic price movements. By combining these strategies, you can trade smarter, minimize unnecessary losses, and optimize your execution—just like a pro.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence. 

If you would like to read more articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

Take control of your crypto  portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”