What Are Spread and Slippage?
Spread is the difference between the best bid and ask prices. Slippage is the deviation between the expected price and the executed price.
On this page
- Why Does the Expected Price Change?
- Calculation via the Order Book
- Price Impact and Slippage Tolerance on DEXs
- Why Increasing Tolerance Might Not Be the Solution
- Consequences of Very Low Tolerance
- Can There Be Positive Slippage?
- Limits of Tools for Reducing Slippage
- How to Verify an Executed Transaction
- Sources
Slippage is the difference between the expected price or amount of a transaction and the price or amount at which it is actually executed. It can occur due to insufficient liquidity in the order book, price changes while the transaction is pending, or the impact created by your own trade in a liquidity pool. The slippage tolerance on a DEX screen is the limit you are willing to accept; it is not a direct commission fee.
Why Does the Expected Price Change?
The trading screen provides information based on the current state. By the time you enter the amount and confirm, other users may use the same orders or cancel their existing ones. If you are swapping on-chain, the pool price may change while waiting for the transaction to be included in a block. Therefore, the estimate on the screen and the finalized transaction result belong to different points in time.
Order size is also critical. If there are only 5 tokens available at the best ask price, a buy order for 50 tokens cannot be fully executed at that price. The order will consume subsequent price levels or, if there is a price limit, it will be partially filled. It would be incomplete to explain slippage only by saying “the market was very volatile”; low depth can lead to the same result even when prices seem stable.
Calculation via the Order Book
Suppose your expected buy price for a token is 200 TL. For your 10-token transaction, let’s say 4 units are executed at 200 TL and 6 units at 205 TL. Your total payment would be 2,030 TL, making your average price 203 TL. Compared to the expected 200 TL, the negative slippage is 1.5%: the 3 TL difference between 203 and 200 is divided by 200 TL.
This calculation does not yet include commissions. If you mix commission into slippage, you won’t be able to see which cost stems from market conditions and which from platform fees. Similarly, the bid-ask spread may already affect the initial quote. It is necessary to specify whether you are comparing against the last traded price or the quote on the confirmation screen. Different references produce different slippage figures.
Price Impact and Slippage Tolerance on DEXs
Price impact results from your transaction changing the pool price. Slippage tolerance, on the other hand, defines the limit of additional change you accept from the time the quote is prepared until the transaction is executed. The interface may show these on separate lines. If there is an 8% price impact due to your trade size, setting the tolerance to 1% does not eliminate that 8% impact.
For example, imagine you expect 500 tokens in exchange for 1,000 USDC and you select 1% tolerance. The simplified minimum output is 495 tokens. If transaction conditions yield 497 tokens, it stays within the limit; if it yields only 490 tokens, the transaction is rejected. The minimum output shown by the actual interface is calculated along with fees and protocol rules. Always rely on the exact limit in the transaction summary.
Why Increasing Tolerance Might Not Be the Solution
When a transaction repeatedly fails, it may seem tempting to increase the tolerance. However, this means you are accepting a worse outcome. It does not fix the source of the problem, such as insufficient liquidity, a token’s transfer tax, or rapidly changing prices during the transaction. Very high tolerance can also create a wider field of movement for participants who exploit transaction ordering.
For instance, choosing a 10% tolerance when the expected output is 1,000 tokens makes a 900-token output acceptable by simple calculation. If a user assumes that 10% is merely a “success setting,” they may receive significantly fewer assets than expected at the end of the transaction. If an unusually high tolerance is required to buy or sell a token, it is not appropriate to proceed without understanding the contract rules and liquidity.
Consequences of Very Low Tolerance
If tolerance is too low, even a small price change can cause the transaction to fail. In a transaction that is included on-chain but rejected, the swap is not performed, yet network fees may still be paid. Therefore, sending a failed transaction repeatedly with the same settings can accumulate costs. Distinguishing a pending transaction from a failed transaction on a block explorer is the first step.
There is no single correct tolerance rate for everyone. The waiting time of the network used, the depth of the pool, the volatility of the token, and the transaction amount all vary. The interface default is not a guarantee to be accepted without reading the result. Calculating the amount difference between the expected output and the minimum output in monetary terms makes the effect of the percentage setting on your budget concrete.
Can There Be Positive Slippage?
Yes. If the market moves in your favor while the transaction is pending, a better price or a higher output may occur. However, how the protocol and interface reflect this improvement can vary. The quote, the guaranteed minimum, and the executed output should be distinguished from one another. A transaction that executes better than the estimate does not indicate that the same situation will be repeated in subsequent transactions.
In a sale, you have to think of the direction in reverse. When the expected average selling price is 100 TL, an execution at 98 TL is a negative difference, while 102 TL is a positive difference. In a purchase, a lower execution price is in your favor. Specifying the transaction direction when making the percentage calculation prevents misinterpretation by looking only at a plus or minus figure.
Limits of Tools for Reducing Slippage
A limit order limits the price you will accept; it may not execute if a counter-order is not found. A more liquid trading pair or a different route might offer a better quote; however, additional conversion and transfer fees may arise. Breaking the transaction into parts can reduce the price impact of a single trade, but it may increase price changes over time and repeated fixed fees.
When comparing these options, look at the net assets you will have at the end for the same total amount. The fact that a route gives a good price for a small amount does not mean it will remain good for a large amount. If transfers between multiple platforms are required, price changes may also occur during the transfer period. The opportunity on the screen is not locked in until all transactions are completed.
How to Verify an Executed Transaction
On a centralized exchange, collect all matches from the trade history and divide the total amount by the total quantity. On a DEX, use the sent and received token amounts in the transaction record; record the network fee separately. Noting what the value of the expected quote was at that moment makes the comparison meaningful. Simply looking at the final dollar value of the wallet can confuse post-transaction market movement with slippage.
For example, if the token price drops by 3% after receiving 495 tokens in a swap, the additional drop in wallet value is not the swap’s slippage. First separate the transaction’s own result, then the asset’s subsequent price movement. This approach allows you to clearly see which cost arises from the order, which from fees, and which from market changes.