What is Slippage? Here's the Full Explanation!

What is Slippage? literally, slip means to lose because of a slippery surface. This situation is common for both buyers and investors when they trade on crypto exchange.

Basically, this happens in almost all investment instrument markets. From stocks, currencies, bonds, futures, shares and crypto assets.

This situation can arise for various reasons. However, what often influences price changes is the level of supply and demand for assets.

Apart from the level of supply and demand, major events and market effects also affect the price of an asset. Investors and investors avoid these price fluctuations to maximize the value of their investment. 

What is Slippage? 

If you ask what is Slippage? Then Slippage is the difference between the expected price and the price used to buy and sell.

These price gap situations, which are often referred to as stops, can occur at any time, but most of these situations occur when market volatility is high and users place market orders. 

Withdrawals can also occur when large purchases or sales occur. However, once the infrastructure is built, the amount of resources available to support advertising/requests is insufficient.

When you trade in crypto, you really expect to buy and sell a number of clients at the prices that occur during the trade. However, this doesn't happen often due to the volatile crypto asset market.

Because the difference in crypto asset prices can change every second. When a discount occurs, the customer and entrepreneur must accept the price difference that occurred during the transaction.

How to Avoid Slippage

In a volatile and dynamic market like crypto, avoiding scams is not an easy thing to do. However, there are several ways to reduce losses due to slippage, including the ones below

Set Stop loss

Stop loss is one of the efforts you can take to prevent losses from getting bigger by exiting the market as soon as the asset price suddenly drops and exceeds the price limit you have set. This makes it possible to avoid major disturbances. 

Using Active Exchange Services

Business speed is one way to avoid business failure and crime. Therefore, it is important that you deal with an exchange that works and can process transactions quickly.

This is because the less time it takes for an exchange to process a request, the less time there is for a price change to occur, which can prevent the possibility of increasing the release rate.

Also read: Wafa Taftazani emphasizes that Web3 and crypto assets are not the way to get rich instantly

Avoid Volatile Markets 

Lastly, make sure not to trade when the market is volatile. This is because the crypto market is very sensitive to developments and changes in the current situation.

Various events and changes in economic conditions, especially in the crypto market, can have a direct impact on price movements. Therefore, avoiding trades at this time can help avoid slippage or at least reduce the probability of an exit.

Also read: What is Crypto Asset? Check out the Full Review!

So, what is Slippage? That is a situation where expectations of certain investment or trading products are not as good as reality.