What Is Slippage? Definition & Example

Slippage is the gap between the price you expected and the price you got. It is not a fee and no one charges it to you — it is a structural consequence of how order books work, which makes it easy to overlook and expensive to ignore.

It has two distinct causes. Depth slippage happens when your order is large relative to the liquidity resting in the book: you consume the best prices first and the remainder fills progressively worse. Latency slippage happens when price simply moves between the moment you decide and the moment your order arrives, which dominates during volatile periods.

Both scale in ways that punish size and thin markets. A $1,000 market order in BTC will barely register. The same order in a low-cap altcoin can move price several percent by itself — and then you have to get out again, paying the same cost in reverse. Round-trip slippage on illiquid assets frequently exceeds every fee in the trade combined.

The defences are unglamorous and effective: use limit orders where you can afford to wait, split large orders across time rather than sending one block, avoid trading during the first seconds after a major news event, and check the order book depth before sending size into an unfamiliar market.

When modelling a strategy, include slippage explicitly. A backtest that assumes perfect fills at mid-price will show an edge that evaporates in live trading — and for high-frequency strategies on thin markets, slippage is usually the single largest cost line, larger than fees and funding together.