Slippage

Slippage happens because markets move. Between the moment you submit an order and the moment it is filled, the price can shift — especially in fast-moving or illiquid markets. Suppose you place a market order to buy a hypothetical cryptocurrency at $500, but by the time the exchange processes your order, the best available ask has moved to $504. You have experienced $4 of slippage. That is not a fee anyone charged you; it is simply the market moving against you in the brief window between intention and execution.

Slippage is most severe in two situations: when volatility is high and prices are changing rapidly, and when order size is large relative to available liquidity. A large order cannot always be filled at a single price. Instead, it gets matched against multiple layers of the order book at progressively worse prices — a concept sometimes called market impact. The bigger the order relative to market depth, the more of the order book it consumes and the worse the average fill price.

Traders use limit orders — instructions to buy or sell only at a specified price or better — to control slippage. The trade-off is that a limit order may not execute at all if the market never reaches that price, whereas a market order guarantees execution but not price. Understanding this trade-off is part of reading how market quotes work.

Slippage is particularly relevant in cryptocurrency exchanges and thinly traded commodity contracts, where order books can be shallow. It also appears in discussions of arbitrage: a theoretically profitable price gap can disappear entirely once slippage is factored into both legs of the trade.