Slippage is the difference between the expected price of a trade and the price at which the trade actually executes. It commonly occurs in low-liquidity markets or during high volatility.
Causes of slippage: Low liquidity in the trading pair, large order sizes, high market volatility, slow transaction confirmation, and front-running by MEV bots.
Slippage settings in DeFi: Most DEXs allow setting maximum slippage tolerance, too low may cause failed transactions, too high may result in poor execution, and typical settings range from 0.5% to 3%.
Reducing slippage: Trade during high liquidity periods, break large orders into smaller ones, use limit orders when possible, and choose high-liquidity pairs and venues.