Low slippage trading refers to executing a trade with minimal difference between the expected price and the actual execution price. This condition is highly desirable in financial markets, especially for large orders, as it indicates a deep and liquid market where significant price deviations are unlikely. In decentralized exchanges, low slippage is achieved through ample liquidity within automated market maker pools and efficient pricing algorithms. It ensures that traders receive a price close to their quoted expectation, reducing unexpected costs.
Context
Achieving low slippage trading is a primary objective for decentralized exchanges seeking to compete with traditional financial venues and attract institutional traders. News often covers protocol upgrades and liquidity initiatives aimed at reducing slippage, thereby improving the trading experience. A critical future development involves continuous innovation in AMM designs and liquidity aggregation techniques to consistently offer minimal price impact for all transaction sizes.
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