Yesterday I wrote about market depth. Today I want to talk about something related: slippage.
Slippage is the difference between the price you expect and the price you actually get.
Say you want to buy $10,000 worth of a token. You see the price at $1.00. You place a market order. But by the time your order fills, the average price is $1.02. That 2% difference is slippage.
Why does this happen? Because your order eats through the order book. The first $3,000 might fill at $1.00. The next $3,000 at $1.01. The next $4,000 at $1.02. Your average price ends up higher than the screen price.
This is why depth matters. A token with thin liquidity has more slippage. A token with deep liquidity has less.
Slippage is also a hidden cost. People look at fees — 0.1% here, 0.1% there — but ignore slippage. For small caps or low-liquidity tokens, slippage can be 2% or more. That's twenty times the fee.
The lesson: before you trade, check the depth. If you're moving size, slippage matters more than fees.
#CryptoEducation #Slippage #Liquidity
Slippage is the difference between the price you expect and the price you actually get.
Say you want to buy $10,000 worth of a token. You see the price at $1.00. You place a market order. But by the time your order fills, the average price is $1.02. That 2% difference is slippage.
Why does this happen? Because your order eats through the order book. The first $3,000 might fill at $1.00. The next $3,000 at $1.01. The next $4,000 at $1.02. Your average price ends up higher than the screen price.
This is why depth matters. A token with thin liquidity has more slippage. A token with deep liquidity has less.
Slippage is also a hidden cost. People look at fees — 0.1% here, 0.1% there — but ignore slippage. For small caps or low-liquidity tokens, slippage can be 2% or more. That's twenty times the fee.
The lesson: before you trade, check the depth. If you're moving size, slippage matters more than fees.
#CryptoEducation #Slippage #Liquidity
