This article explores what slippage is, why it occurs, and actionable strategies to mitigate its impact.
Slippage refers to the difference between the expected price of a trade and the actual price at which it is executed. It typically occurs in volatile markets or during periods of low liquidity when the price of an asset changes between the time you place an order and when it gets executed.
For instance, if you place a market buy order for Bitcoin at $30,000 but it gets executed at $30,100, the $100 difference represents slippage. While this may seem negligible for small trades, slippage can quickly erode profits during high-volume transactions.
Slippage can occur for several reasons:
Fybit offers several tools and features designed to help traders minimize slippage. By employing these techniques, you can trade more effectively and protect your profits.
Instead of market orders, consider using limit orders to gain more control over your trades. With a limit order, you set the maximum price you’re willing to pay (for a buy) or the minimum price you’ll accept (for a sell). This ensures your trade only executes at your specified price or better, helping you avoid unexpected slippage.
Slippage is often lower during periods of high market liquidity. These times usually align with the overlap of major trading sessions, such as the New York and London sessions in forex markets. On Fybit, you can monitor trading volume and choose optimal times to execute your trades.