Slippage

Slippage refers to the difference between the expected price of a trade and the actual price at which the trade is executed. It occurs most commonly in markets with high volatility or low liquidity.

Understanding Slippage

When you place an order on any exchange, the price you see before execution is not always the price you will get. The final execution price can change due to other trades occurring in the market before your order is fully processed. This price deviation is known as slippage.

Slippage can be positive or negative:

  • Positive Slippage: You receive a better price than expected.
  • Negative Slippage: You receive a worse price than expected.

Factors Influencing Slippage

  1. Market Volatility
    In highly volatile markets, prices can change rapidly, increasing the likelihood of slippage.

  2. Liquidity Depth
    Trades involving large volumes relative to the available liquidity in the order book are more prone to slippage.

  3. Order Type

    • Market Orders: Execute immediately but are more vulnerable to slippage, as they prioritize speed over price.
    • Limit Orders: Allow you to set a specific price, eliminating slippage risk but reducing the likelihood of immediate execution.

Max Slippage

Max slippage defines the largest acceptable price deviation from the mark price. During execution, an order will be canceled if the price exceeds the slippage limit or falls outside the market Price Bands.

Example of Slippage in Perpetual Futures

Let’s say you want to go long on a perpetual futures contract for ETH/USDT:

Scenario 1: Market Buy Order (Long)

  • Mark Price: $3,500

You place a market buy order for 1 ETH.

  • If your order executes at $3,495, this represents positive slippage, as you entered the trade at a better price.
  • On the other hand, if your order executes at $3,505, the $5 difference from the Mark Price is the negative slippage, as you paid slightly more than expected.

Scenario 2: Market Sell Order (Short)

  • Mark Price: $3,500

You place a market sell order for 1 ETH.

  • If your order executes at $3,505, this represents positive slippage, as you exited the trade at a higher price than expected.
  • Conversely, if your order executes at $3,495, the $5 difference is the negative slippage, as you received slightly less than expected.

How to Update Max Slippage

  1. Navigate to the Trade section of the UI

  2. Locate the Order section, and click on the Max Slippage value

  1. Some markets have max cap of slippage percentage (In this case BTC-USD-PERP has max slippage of 2%)
  1. Adjust the slippage tolerance to your preferred percentage. You can use decimals as well as long as it is within max slippage of each market, example : 0.5% works since it is below 2% for BTC-USD-PERP.
  1. Click confirm to save the slippage setting