Slippage is the difference between the price you expect when placing a trade and the price at which the order actually executes. Negative slippage gives you a worse price. Positive slippage gives you a better price.
Slippage occurs when prices or available liquidity change between order submission and execution. A market order seeks immediate execution at the best available prices, but it does not guarantee the exact price shown when you place the order.
A 1,000-share order, for example, may fill across several price levels rather than at one quoted price.
Slippage in Trading at a Glance
| Term | Meaning |
|---|---|
| Expected price | The price shown or estimated when you submit the order |
| Execution price | The actual price at which the order fills |
| Negative slippage | The trade executes at a worse price than expected |
| Positive slippage | The trade executes at a better price than expected |
| Market order | Prioritises execution, so the final price can vary |
| Limit order | Sets the maximum or minimum acceptable price, but may not fill |
| Slippage tolerance | The maximum price movement accepted for some crypto and DeFi trades |
How Does Slippage Happen?
Slippage happens when an order fills at a different price from the one used as its benchmark. That can result from a fast-moving market, limited liquidity or an order that is large enough to consume several levels of the order book.
Suppose a stock has these available sell orders:
| Available shares | Ask price |
|---|---|
| 100 shares | $100.05 |
| 300 shares | $100.10 |
| 600 shares | $100.15 |
A market order to buy 1,000 shares cannot fill entirely at the first ask of $100.05. It uses all three price levels and receives an average execution price of $100.125.
Compared with the initial $100.05 ask:
- Slippage: $0.075 per share
- Percentage slippage: approximately 0.075%
- Additional cost on 1,000 shares: $75
This is often called market impact or order-book slippage. The order moves through the available liquidity as it fills.
What Causes Slippage?
1. Rapid Price Movements
Prices can change while an order travels from you to your broker, exchange or trading venue. Slippage is more likely during volatile markets, major news releases and sudden price gaps.
The SEC notes that the market price can change substantially between order submission and execution.
2. Low Liquidity
Liquidity describes how much buying and selling interest is available near the current market price. A liquid market usually has more orders close to the best bid and ask. In a thin market, the gaps between available prices can be much wider.
CME Group identifies order-book depth and the quantity available at each price as important measures of liquidity. More liquidity usually reduces the price effect of a large trade.
3. Large Orders
A large market order can consume several levels of the order book. The larger the order compared with the available liquidity, the greater the potential slippage.
4. Market Orders
Market orders prioritise execution speed over price certainty. A market buy generally fills against available sell orders, while a market sell fills against available buy orders.
The final fill can therefore differ from the last traded price or the price visible on a chart.
5. Stop-Market Orders
A stop order can create slippage because reaching the stop price activates a market order. The stop price is a trigger, not a guaranteed execution price.
If the market moves quickly, the order may execute well above or below that level.
Which Order Types Are Affected by Slippage?
All order types carry some execution risk, but the amount of price control differs by order type.
| Order type | Slippage risk | Main trade-off |
|---|---|---|
| Market order | High in fast or illiquid markets | Usually prioritises execution over price |
| Limit order | Limits adverse price movement | May not execute |
| Stop-market order | High after the stop triggers | Seeks an exit but does not guarantee the stop price |
| Stop-limit order | Limits the execution price | May remain unfilled after activation |
| Crypto or DeFi swap | Depends on liquidity, price movement and settings | Low tolerance can cause failure; high tolerance can allow a worse rate |
A buy limit order can execute only at the limit price or lower. A sell limit order can execute only at the limit price or higher. Limit orders provide price protection, but they do not guarantee execution.
A stop-limit order provides more price control than a stop-market order because it becomes a limit order after activation. However, the market can move beyond the limit price, leaving the position open.
How Is Slippage Calculated?
Slippage is calculated by comparing the actual fill with an expected or benchmark price.
For a buy order:
[ \text{Adverse slippage} = \text{Actual execution price} - \text{Expected price} ]
For a sell order:
[ \text{Adverse slippage} = \text{Expected price} - \text{Actual execution price} ]
The percentage calculation is:
[ \text{Slippage percentage} = \frac{\text{Adverse slippage}}{\text{Expected price}} \times 100 ]
Example
You expect to buy an asset at $50.00, but the order fills at $50.10.
- Slippage: $0.10
- Slippage percentage: 0.20%
- Extra cost on 500 units: $50
The result depends on the benchmark. Traders may compare the fill with the best ask, best bid, midpoint, last traded price or price available when the order reached the market. A useful slippage figure should identify which benchmark it uses.
Is Slippage the Same as the Spread?
No. Slippage, the spread and commission are separate trading costs.
| Cost | Definition |
|---|---|
| Spread | Difference between the bid and ask prices |
| Slippage | Difference between the expected benchmark price and actual execution price |
| Commission | Fee charged by the broker or trading platform |
| Market impact | Price movement caused or intensified by the trader's own order |
Buying at the ask already means paying the bid-ask spread. If the ask moves from $100.05 to $100.10 before the order fills, the additional $0.05 is slippage relative to the earlier ask.
In automated market makers such as Uniswap, price impact describes how a transaction changes the pool price. Larger trades and smaller liquidity pools generally create greater price impact.
Price impact is related to slippage, but it is not identical to a market price changing while an order is being submitted or filled.
How Can Traders Reduce Slippage?
Traders can reduce slippage by controlling the order price, choosing liquid markets and avoiding conditions that make prices move quickly. No method removes the risk entirely.
Use Limit Orders When Price Matters Most
A limit order can prevent a purchase above a specified price or a sale below a specified price. The trade-off is that the order may not fill.
Trade Liquid Markets
Highly traded stocks, futures contracts and cryptocurrency pairs generally have more available liquidity. Before submitting a large order, check the spread, order-book depth and estimated average fill price.
Reduce Order Size or Split the Order
Breaking a large order into smaller pieces can reduce its immediate effect on the order book. Execution algorithms such as time-weighted average price strategies may also divide trades over time, although they cannot remove market risk.
Avoid Trading During Extreme Volatility
News announcements, market openings, market closures and sudden liquidity shortages can widen the gap between displayed and executable prices.
Treat Stop Prices as Triggers, Not Guaranteed Exits
A stop-market order may execute at a different price from its stop level. Traders who require a price limit should consider whether a stop-limit order is more appropriate, while recognising that a stop-limit order may not execute.
Set Crypto Slippage Tolerance Carefully
On a decentralised exchange, slippage tolerance sets the maximum price deterioration accepted before the transaction fails.
A setting that is too low can cause failed transactions. A setting that is too high can allow an unexpectedly poor exchange rate. Uniswap describes slippage limits as minimum-output protection for swaps.
Bottom Line
Slippage is an execution-price difference. The main decision is whether execution certainty or price control matters more for the trade.
Use liquid markets and limit orders when controlling the price matters. If exiting the position matters more, a market or stop-market order may be appropriate, but the fill can differ from the displayed or trigger price.