Slippage is the difference between the price you expected and the price you actually got. You click buy at $3,000 but your order fills at $3,015. That $15 difference is slippage.
It's one of those hidden costs that slowly eats into your profits if you're not paying attention.
Why Slippage Happens#
Market orders. When you place a market order, you're saying "fill me now at whatever price is available." If there's not enough liquidity at the current price, your order eats into the order book and fills at worse prices.
Low liquidity. Some assets or trading pairs don't have much volume. The order book is thin. Even a small order can move the price.
High volatility. When price is moving fast, the price you see when you click isn't the price by the time your order hits the exchange. This is especially common during news events, liquidation cascades, or sudden pumps and dumps.
Large orders. If you're trading size, there might not be enough orders at your target price. Your order fills across multiple price levels, and the average fill is worse than expected.
How Slippage Affects Your Trades#
Slippage hits you twice, on entry and on exit.
- On entry: You wanted to buy at $3,000 but got filled at $3,010. You're already starting the trade $10 in the hole.
- On exit: You wanted to sell at $3,100 but got filled at $3,085. You made $15 less than expected.
Combined, that's $25 in slippage on a single round trip. Multiply that across hundreds of trades and it adds up fast.
For high frequency traders or scalpers, slippage can be the difference between a profitable strategy and a losing one.
Positive Slippage#
Slippage isn't always bad. Sometimes you get filled at a better price than expected. You wanted to buy at $3,000 and got filled at $2,995. That's positive slippage, rare but it happens.
How to Reduce Slippage#
Use limit orders instead of market orders. A limit order only fills at your specified price or better. You might not get filled if price moves away, but you won't get slipped.
Trade liquid pairs. Major assets like BTC and ETH on big exchanges have deep order books. Slippage is minimal. Altcoins on smaller exchanges are a different story.
Avoid trading during extreme volatility. When the market is crashing or pumping, slippage spikes. If you're not in a rush, wait for things to calm down.
Split large orders. Instead of one big order, break it into smaller chunks. Each piece has less market impact.
Use TWAP or iceberg orders (if available). Some exchanges offer tools that execute large orders over time to minimize slippage.
Slippage and Copy Trading#
If you're copy trading, slippage matters even more. The trader you're copying gets filled first. By the time your order goes through, the price might have moved, especially on fast moving trades or less liquid assets.
This is why Mirrorly lets you set slippage limits. If the price has moved too far from the trader's entry, your order won't execute. It protects you from getting terrible fills.
Slippage is a cost of doing business in trading. You can't eliminate it, but you can minimize it. Use limit orders when possible, trade liquid markets, and always factor slippage into your expected returns. The traders who ignore it slowly bleed out. The ones who manage it keep more of what they earn.
