Definition ∞ Execution risk denotes the potential for a trade or transaction to be completed at a price different from the intended or quoted price. This discrepancy can occur due to market volatility, insufficient liquidity, or delays in order processing, resulting in unfavorable outcomes for the transacting party. Slippage is a common manifestation of execution risk, particularly prevalent in fast-moving markets or when dealing with large order sizes. Managing this risk requires careful consideration of market depth, order types, and the speed of transaction settlement.
Context ∞ In digital asset trading, execution risk is heightened by the 24/7 nature of markets and the varying liquidity across numerous exchanges and decentralized protocols. Discussions frequently address the impact of network congestion and transaction fees on the final execution price of on-chain operations. Future advancements in trading infrastructure and layer-2 scaling solutions aim to minimize execution risk by improving transaction speed and reducing latency.
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