Thin liquidity in fast markets can cause slippage, making backtesting results misleading. 📉
Understanding this execution risk is critical for automated trading systems.
Here is how to systematically manage slippage:
1. Measure slippage by recording both the expected price and the actual fill price. WolfBot automatically exposes this difference for review.
2. Constrain risk by setting a maximum slippage tolerance directly on your market orders.
3. To avoid adverse slippage, consider using limit or maker-first orders, as these require your requested price or better.
4. When setting up a strategy, decide your priority: avoiding slippage (limit/maker-first) or guaranteeing execution (market orders). This choice defines your risk profile. ✅
For a deeper dive into these concepts, check out our academy guide: https://wolfbot.io/en/academy/slippage-in-automated-trading
#AutomatedTrading #Slippage #CryptoExecution #TradingStrategy #AlgorithmicTrading
Understanding this execution risk is critical for automated trading systems.
Here is how to systematically manage slippage:
1. Measure slippage by recording both the expected price and the actual fill price. WolfBot automatically exposes this difference for review.
2. Constrain risk by setting a maximum slippage tolerance directly on your market orders.
3. To avoid adverse slippage, consider using limit or maker-first orders, as these require your requested price or better.
4. When setting up a strategy, decide your priority: avoiding slippage (limit/maker-first) or guaranteeing execution (market orders). This choice defines your risk profile. ✅
For a deeper dive into these concepts, check out our academy guide: https://wolfbot.io/en/academy/slippage-in-automated-trading
#AutomatedTrading #Slippage #CryptoExecution #TradingStrategy #AlgorithmicTrading
