Price Slippage

Definition ∞ Price slippage occurs when the execution price of a trade deviates from the expected price at the time the order was placed. This discrepancy typically happens in volatile markets or when trading large volumes, as market depth may not be sufficient to absorb the order without affecting the asset’s price. Slippage can result in a less favorable fill price for the trader, impacting overall profitability. It is a common phenomenon in markets with low liquidity or high demand fluctuations.
Context ∞ In digital asset markets, price slippage is a frequent concern for traders, particularly with less liquid altcoins or during periods of significant market movement. Decentralized exchanges (DEXs) can be particularly susceptible to slippage due to varying liquidity pools and automated market maker (AMM) mechanisms. Traders often employ strategies like setting slippage tolerance limits or utilizing liquidity aggregation services to mitigate its impact, especially during large transactions.