What it is and why it costs the most
Slippage is the difference between the price you saw and the price your trade actually got. You saw 100, you bought at 100.8 — that is 0.8% of slippage.
In arbitrage this is the main hidden cost. Fees are visible in advance and easy to calculate. Slippage is visible nowhere, emerges after the fact, and can swallow a route whole.
Where it comes from
The price on screen is the best order in the book, and a limited size sits behind it. If your order is bigger, the remainder fills at the next levels, which are worse.
Concretely: 200 dollars sits at 100.00, another 300 at 100.50, the rest at 101.00. You buy 1000 worth. The first 200 fill at 100.00, the next 300 at 100.50, the last 500 at 101.00. Your average is about 100.65 — slippage of 0.65%.
The direct consequence: slippage grows with your size. The same route that is profitable on three hundred dollars can lose money on five thousand.
The second source: time
While you press buttons, the price moves. On a calm market that is fractions of a percent; during news, whole percent. The longer the path from decision to execution, the bigger this part.
This is exactly why cross-exchange arbitrage advises keeping balances on both venues: it removes twenty minutes of transfer, and the price movement with it.
Where slippage is especially dangerous
- Small coins. A few thousand dollars of turnover and any real order moves the price by percent.
- DEX pools. The price there comes from the ratio of coins in the pool: in a 30 000 pool a 3 000 trade eats around 9%.
- The third trade of a triangle. Two legs done, the third pair thin, and the whole loop turns negative.
- Moments of sharp movement. Market makers pull orders and the book empties.
How to reduce it
- Use limit orders. You set the price and nothing fills worse. The cost is that it may not fill.
- Split large trades. Several orders in sequence give a better average than one big one.
- Check depth in advance in order books, not after the trade.
- Put your real amount into scanner filters. They recalculate routes for your size and the unreal ones disappear.
- Set sane slippage on DEX. 0.5–1% for liquid pairs, up to 3% for small ones. Set 20% and 20% is what you lose.
- Do not trade in the first seconds after news. Wait for the book to refill.
Budgeting for it
A practical rule: allow 0.1–0.2% on liquid pairs, 0.3–0.5% on medium ones, at least 1% on small ones. If a route stops being profitable after that correction, it was never there.
Our scanners compute slippage from the capital you enter — which is why we ask for a real number rather than a round thousand.
Frequently asked
Can slippage be eliminated entirely? With a limit order yes, but then you risk it not filling and leaving you with half a route.
Why is it larger on DEX? Because there is no order book: the price is a formula of pool size, so your trade always moves it.
How do I know a pair is too thin? Look at daily turnover. If it is comparable to your trade size, you are the market.