What is "Slippage" in DeFi?
Last updated January 7, 2025
FAQ: What is "Slippage" in DeFi?
Slippage refers to the difference between the expected price of a trade and the actual price at which the trade is executed.
This occurs because of price changes in the market while your transaction is being processed. For example, if you intend to buy a token at $100 but the market moves during execution and you pay $101, the $1 difference is the slippage.
Why does slippage happen?
- Market Volatility: Prices can fluctuate rapidly, especially in low-liquidity markets.
- Low Liquidity: If there isn’t enough liquidity in the market, your trade can impact the price.
By understanding and managing slippage, you can minimize unexpected costs and ensure smoother trading experiences.
FAQ: How to manage "Slippage" in your Rule?
On Coinrule, you can set a maximum slippage as part of the ACTION in the rule editor. This allows you to define the maximum percentage difference you are willing to accept between the expected price and the actual execution price for a trade.
Max Slippage is the maximum percentage difference you’re willing to accept. For example, setting a slippage of 1% means you’re okay with paying up to 1% more or less than the expected price. The rule will execute the trade only if the price difference stays within 1%. If the market moves beyond this threshold, the trade will not be executed, helping you avoid unexpected costs caused by high volatility or low liquidity.
By setting a slippage tolerance, you can better control your trades and maintain a consistent strategy.