Slippage is a key issue that every cryptocurrency investor can't afford to ignore. Whether you're new to trading or an experienced trader, slippage can have a direct impact on your trading costs and profits. In this article, we'll take a closer look at what slippage is, why it occurs, and how to minimize its negative impact on trading results. We will also combine examples and data to show you the actual impact of slippage on trading, helping you to trade smarter and more confident in dealing with this challenge.
What is slippage? Why does it happen?
Definition of Slippery Point
Slippage is the difference between the price at which a trade is executed and the price at which an order is placed. When the market is volatile or illiquid, the price you expect to pay when placing an order may be different from the price at which the order is actually executed, and this difference is known as slippage.
Common Scenarios for Slippery Points
Slippage usually occurs when the market is extremely active, such as during major news releases or rapid market movements. In less liquid markets, slippage can also occur when demand for trades exceeds the number of pending orders.
Positive and Negative Slip
Slippage can be categorized into two types: positive slippage (price better than expected) and negative slippage (price worse than expected). Most traders are more sensitive to negative slippage because it increases trading costs.
How does slippage affect your trading results?
Increase in transaction costs
Slippage directly affects your transaction costs. For example, if you place an order to buy Bitcoin at $10,000, but due to slippage, the actual transaction price is $10,050, this extra $50 is the additional cost due to slippage.
The amplification effect of leveraged trading
In leveraged trading, the impact of slippage can be magnified. For example, with 10x leverage, a slippage of 1% will translate into a change in gain or loss of 10%, increasing the risk exponentially.
Influence the execution of trading strategies
For short term traders, slippage can affect the precision of your strategy. In arbitrage trading, for example, slippage can eat up all your profits and render a trade meaningless.
What are the causes of slippery spots?
Insufficient market liquidity
Liquidity is one of the central factors affecting slippage. In a market with insufficient orders, a single large trade can lead to large price swings and slippage.
Excessive market volatility
Slippage is one of the most common causes of market volatility when prices move rapidly in a very short period of time, resulting in an inconsistency between the price at which an order is placed and the price at which it is filled.
Efficiency of aggregation on trading platforms
Different trading platforms have different summarization efficiencies. Some platforms may have slower processing speeds during high trading volumes, resulting in increased slippage.
How to minimize the impact of slippage?
Choose a platform with high liquidity
Slippage can be minimized by choosing a liquid platform such as OKX. These platforms usually have greater order depth and are able to take on more trading demand.
Use of Limit Tickets
Limit orders help you to ensure that the price of your trade stays within the expected range, thus avoiding losses due to slippage.
Avoid high volatility
Slippage is more likely to occur during periods of high market volatility, such as when major announcements are made. Choosing to trade during periods when the market is more stable can reduce risk.
Slippage points in relation to rebate strategies
The Rebate Advantage
With rebates, you can partially cover the additional costs caused by slippage. For example, with Euronext's rebate program, you get a percentage of your fees back on every trade, thus reducing your overall costs.
Optimize your strategy by combining slippage and rebates.
Traders can factor the cost of slippage into their trading strategy and use it in conjunction with a rebate program to increase their profitability. This way, even if slippage is unavoidable, the impact on overall returns can be minimized through rebates.
Frequently Asked Questions Q&A
1. Can slips be avoided altogether?
It cannot be avoided completely, but it can be effectively minimized by limit orders, choosing markets with high liquidity, and avoiding high volatility periods.
2. Does slippage exist only in cryptocurrency trading?
No. Slippage exists in all financial markets, including forex, equities and futures. Slippage exists in all financial markets, including forex, stocks and futures, it is just more common in the cryptocurrency market.
3. Does slippage affect long-term investments?
Slippage has a relatively small impact on long-term investments because investors are more interested in the long-term appreciation of their assets than in short-term price fluctuations.
By understanding the concept of slippage and how to deal with it, you will be able to face trading challenges more comfortably and improve your overall profit performance. I hope this article will help you better understand slippage and achieve better results in your future trading endeavors!
English 
Chinese