Slippage

When you trade on a DEX, the price is determined by a mathematical formula (the Automated Market Maker or AMM). If you are buying a large amount of a token relative to the size of the "liquidity pool," your own buy order will push the price up as it is being processed. The difference between the price you saw when you clicked "Swap" and the final price you paid is the slippage. There are two types: "Expected Slippage" (due to the size of your trade) and "Price Impact" (due to other people trading or bots attacking your trade while it's in flight).

Most wallets and DEXs allow you to set a "Slippage Tolerance" (e.g., 0.5% or 1%). This is your way of saying: "I want this trade, but if the price moves against me by more than 1% before my transaction is confirmed, cancel the whole thing." If you set your tolerance too low, your trades will fail frequently during periods of high volatility, wasting your gas fees. If you set it too high, you become vulnerable to "sandwich attacks," where a bot sees your high tolerance and intentionally moves the price to the very edge of your limit to steal the difference.

For investors, managing slippage is a crucial skill for protecting capital, especially when trading smaller "altcoins" or "memecoins" with low liquidity. To minimize slippage, you can: 1) Break large trades into smaller pieces over time, 2) Use a "DEX Aggregator" (like 1inch or Jupiter) which splits your trade across multiple liquidity pools to find the path of least resistance, or 3) Use a "Private RPC" that protects your trade from being seen by MEV bots. Understanding that slippage is a "hidden cost" of trading-often much larger than the actual swap fee-is key to accurate performance tracking.