Slippage

Slippage in cryptocurrencies is the difference between the expected price of a transaction and the price at which the transaction is actually executed. This phenomenon occurs mainly due to market volatility and low liquidity, when the cryptocurrency price changes between the time an order is placed and when it is executed.

Types of slippages

Slippage can be:

• Positive: When a transaction is executed at a better price than expected

• Negative: When a transaction is executed at a worse price than expected

Why it's worth setting a higher slippage for volatile tokens

Setting a higher slippage tolerance for more volatile tokens is justified for several reasons:

1. Ensuring transaction execution In the case of highly volatile assets, such as memecoins or new tokens, prices can change rapidly. Higher slippage tolerance increases the chance of transaction execution.

2. Adapting to volatility profile The general rule is that the more volatile the token, the higher slippage tolerance you will need.

   For highly volatile assets it is recommended to use the slippage of above 2% to, sometimes, even double-digit values.

3. Responding to low liquidity Tokens with high volatility often also have lower liquidity, meaning less depth in order books. Large orders can significantly impact the price, increasing slippage.

4. Adapting to rapidly changing conditions During periods of high volatility, slippage can quickly reduce profits. Higher tolerance allows traders to adapt to these conditions.