Definition
Slippage can be unfavorable or favorable. It arises when quotes change before execution or the available quantity requires trading at several prices. Define the comparison price clearly: a last traded price, live quote, and order trigger are different references.
How It Works
If a hypothetical buy is expected at 100 USDT but fills at an average of 101, unfavorable slippage is 1%, using (101 − 100) / 100. For a seller, receiving 99 instead of 100 is unfavorable. Trade-induced price impact can contribute to slippage, but a changing market can cause it even for a small order.
Key Considerations
Limit prices or slippage tolerances constrain acceptable execution where supported, but may leave an order unfilled or partially filled. A tolerance is not a promise of execution at that exact deviation. Consider order size and depth; transaction fees remain a separate cost.