Define the Term “Slippage” and Its Impact on Large Crypto Derivatives Orders

Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. It occurs when market orders are filled at progressively worse prices due to insufficient liquidity at the best bid/ask.

For large crypto derivatives orders, especially in illiquid altcoins, slippage can significantly increase the cost of execution, making a seemingly profitable trade turn into a loss. Market makers price this risk into their quotes.