Slippage

Definition

Slippage refers to the difference between the expected execution price of a market order and the actual price at which the order is filled. In the context of price slippage, it specifically measures the price impact caused by executing a market order that consumes multiple levels of available liquidity from the order book.

Example: If you market buy BTC and your order is filled across multiple limit sell orders ranging from $90,000 to $90,002, the slippage is $2 — representing the difference between the initial price level and the highest execution price within your order. These individual slippage values are then combined to provide three key metrics:

1. Maximum Slippage: The largest price deviation recorded in a single trade.

2. Total Slippage: The sum of all price deviations across trades.

3. Average Slippage: The average price deviation per trade.

These metrics are broken down into four categories:

• Buy: Slippage from buy trades.

• Sell: Slippage from sell trades.

• Total: Combined slippage from all trades (buy + sell).

• Delta: The difference between buy and sell slippage (buy - sell).

Key Factors Influencing Slippage:

• Order Size: Larger orders are more likely to consume liquidity at multiple price levels.

• Market Liquidity: Thin order books with low liquidity often result in higher slippage.

• Market Volatility: Rapid price movements can amplify slippage.

Slippage is a critical metric for assessing trade execution quality and understanding the cost associated with market orders, particularly in volatile or low-liquidity environments.