Slippage Meaning

Slippage is the difference between the "Expected Price" of a trade and the "Actual Executed Price." It occurs most frequently in markets with low "Liquidity" or during periods of high "Volatility." In a "Market Order," you are essentially telling the exchange to fill your order as fast as possible, which often means buying up all the cheap "Sell" orders and being forced into the more expensive ones.The mathematical cause of slippage is the "Order Book Depth" or the "Liquidity Curve" of an Automated Market Maker (AMM). If you want to buy 100 units of an asset, but there are only 10 units at the current price, the remaining 90 units must be filled at higher and higher prices.

This is known as "Walking the Book." The "Price Impact" of your own trade is what creates the slippage.In Decentralized Finance (DeFi), slippage is a critical UX factor. If a pool has $10,000 in liquidity, a $1,000 trade will cause significant slippage (price movement).

Users must set a "Slippage Tolerance"; if the actual slippage exceeds this limit (e.g., 0.5%), the smart contract will automatically "Revert" the transaction to protect the user from an unfair price, which is often manipulated by "Front-running" bots.