What Is Slippage in Crypto Trading? Causes and Fixes

Slippage is the difference between the price a trader expects to pay or receive when placing an order and the actual price at which the trade executes, occurring most commonly in fast-moving or thinly traded markets where the available liquidity isn't deep enough to fill an order at a single, stable price.

Slippage is a normal feature of markets, not inherently a sign of malfunction or manipulation, though excessive slippage can significantly erode returns, especially for traders active in smaller or newer tokens.

What causes slippage

On decentralized exchanges using automated market maker pools, every trade shifts the pool's asset ratio and therefore its implied price, explained in detail in our /blog/how-to-read-liquidity-pool-depth guide. The larger a trade is relative to the pool's total depth, the more the price moves during execution, producing greater slippage between the quoted starting price and the final average price paid.

Slippage also increases during periods of high volatility or network congestion. If a transaction sits in a mempool waiting to be confirmed while the underlying price moves, or if many trades are competing to execute against the same pool simultaneously, the eventual execution price can differ meaningfully from what was quoted moments earlier.

How slippage tolerance settings work

Most decentralized exchange interfaces let traders set a slippage tolerance — the maximum percentage difference between the quoted price and the execution price that a trade will accept before it fails rather than executes. Setting tolerance too low can cause legitimate trades to fail repeatedly in volatile conditions, since the price moves past the acceptable range before the transaction confirms. Setting it too high exposes a trader to accepting an unnecessarily poor execution price, and in extreme cases can be exploited by sandwich attacks, a form of MEV extraction where other participants manipulate the price around your trade.

Slippage tolerance setting	Risk if too low	Risk if too high
Very tight (e.g. 0.1%)	Frequent failed transactions in volatile markets	N/A
Moderate (e.g. 0.5%-1%)	Reasonable balance for most liquid tokens	Some exposure to price movement during execution
Very loose (e.g. 5%+)	Rarely fails to execute	Vulnerable to poor pricing or /glossary/mev extraction

Minimizing slippage in practice

A few practical approaches reduce slippage exposure. Trading smaller order sizes relative to a pool's depth reduces price impact directly. Checking a pool's depth before trading, as covered in /blog/how-to-read-liquidity-pool-depth, helps set realistic expectations for what tolerance level is appropriate. Splitting a large order into several smaller trades executed over time can reduce the price impact of any single transaction, though this comes at the cost of execution speed and certainty.

Trading during periods of lower network congestion, and reviewing current /glossary/gas conditions before submitting a transaction, can also reduce the risk of a trade sitting unconfirmed long enough for the price to move unfavorably.

Slippage vs fees

It's worth distinguishing slippage from trading fees, which are a separate, usually fixed or percentage-based cost charged by the exchange or protocol regardless of price movement. Total trading cost is the combination of both: the explicit fee plus any slippage incurred during execution. A trade with a low advertised fee can still end up expensive overall if it incurs significant slippage in a shallow pool.

When slippage signals a bigger problem

Persistently very high slippage on a token, well beyond what its trade size alone would explain, can be a signal of extremely shallow, potentially manipulated liquidity, sometimes associated with the kind of scam patterns covered in /blog/what-is-a-rug-pull-crypto or /blog/common-defi-scams. Treat unusually poor liquidity conditions as a risk signal worth investigating further, not simply a setting to adjust past.

Slippage during market stress

Slippage tends to spike during periods of unusually high volatility or network congestion, such as major news events or sharp market-wide moves. During these periods, gas fees and transaction confirmation times, discussed in /glossary/gas, can rise sharply, and prices can move meaningfully between the moment a transaction is submitted and the moment it actually confirms on-chain. Traders active around known high-volatility events sometimes widen their slippage tolerance temporarily to ensure execution, while accepting the tradeoff of a potentially worse fill price, since a failed transaction during a fast-moving market can be just as costly as excess slippage if it means missing an intended entry or exit entirely.

Bottom line

Slippage is the natural gap between a quoted and executed trade price, driven mainly by trade size relative to available liquidity and by market volatility. Setting a reasonable tolerance, checking pool depth before trading, and sizing orders appropriately are the main practical levers for minimizing slippage costs, especially when trading less liquid tokens.