What is Slippage?
Slippage refers to the situation where the final execution price of an order differs from the price you saw or expected when placing the order. Slippage typically occurs during periods of high market volatility or insufficient liquidity and is considered a normal market phenomenon.
I. Why Does Slippage Occur?
When you submit an order, the market price may have already changed, or there may not be enough orders in the order book to fill your entire request at once. The system then fills your order at the best available price, potentially resulting in a price difference.
Common reasons for slippage include:
High Market Volatility: Prices rise or fall rapidly within a short period.
Insufficient Order Book Depth: Few orders are available, so a large order can "eat through" multiple price levels.
Market Order Execution: Market orders aim for the fastest possible execution and match the current best available price.
II. Potential Impacts of Slippage
Slippage may affect your trading results in the following ways:
Buying at a price higher than expected, or selling at a price lower than expected.
Increased actual trading costs.
Final profit/loss differing from expectations.
III. Which Orders Are More Prone to Slippage?
Slippage is more likely under these conditions:
Market orders (most common)
Large-volume orders
Trading pairs with poor liquidity
Trading during highly volatile market periods
IV. How to Effectively Reduce Slippage?
You can mitigate the impact of slippage by:
Using Limit orders, which specify an acceptable price range for execution.
Trading pairs with higher liquidity.
Avoiding trading during major market-moving events or news releases.
Breaking large orders into smaller batches for execution.
NewCoin Tip: While slippage cannot be completely eliminated, using appropriate order types and risk management strategies can effectively reduce its impact on your trading results.
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