What Is Slippage In Cryptocurrency: How To Avoid It?
If a trader buys or sells their asset at a price not aligned with their expectations, they experience slippage.
Essentially, slippage is the difference between a trade’s expected and actual price. Purchasing and selling cryptocurrencies involves this common occurrence.
When you trade, you have a specific price in mind. Crypto markets move fast, so the price can change between the time your order enters the market and the time it closes.
Consequently, you may end up paying more or less than you had anticipated. If you want to choose a cryptocurrency exchange, there are several things to consider, including fees, security, and the kind of cryptocurrencies offered. Taking custody of your cryptocurrency requires understanding how it is stored and whether you can store it in your own digital wallet.
Similarly, large-volume orders can cause slippage, as there may not be enough buyers or sellers willing to fill them at the current price. As a rule, professional traders “scale into positions” when they are faced with orders worth millions of dollars.
The market volatility of cryptocurrency makes it particularly vulnerable to slippage. A smaller market makes this more apparent, since you have to contend with a lack of volume as well. Markets move to the next price that can match orders if there are no buyers or sellers.
Depending on their impact on your trades, slippages can be positive or negative. If you have positive slippage, you get your order executed at a better price than the one you originally placed. For instance, if you place a buy order at a lower rate than what you ordered, it puts you in a better position to make more money. In recent years, keeping bitcoin secure has become less time-consuming and complex, but still requires some planning. Anyone with a reasonable amount of bitcoin should do it. It’s the private key, not the coins, that’s stored in the bitcoin wallet.
What’s The Best Way To Avoid Slippages?
Especially if you’re a short-term trader with lots of trades, slippages can cost you a lot. In this article, we’ll show you how to eliminate or at least minimize slippages in your trades.
Slippages can be avoided by using limit orders. You can only get slippages if you use market orders. A market order is a trade order that gets executed at the best market price. When you use limit orders, your order will execute at exactly the price you want, not at another price.
Setting limit orders isn’t guaranteed to execute; thus, you may miss out on a great trade opportunity.
Slippages can also be reduced by trading less volatile markets. Because crypto is volatile and the price changes quickly, it may seem impossible. Nonetheless, you should stay away from trading during times when major events or announcements affect the market. There’s a lot of volatility during such periods.