Slippage refers to the difference between your expected/requested price of a trade and the actual price at which it gets executed. It is particularly common in markets characterized by high volatility and limited liquidity, such as the cryptocurrency market. Due to the inherent instability of the cryptocurrency market, traders may encounter slippage during rapid price fluctuations.

1. What Factors Can Cause Slippage in Crypto Market

(1) Poor or insufficient liquidity on exchanges
When a trading platform lacks liquidity, executing large market orders may deviate from the expected price. For instance, if a user intends to buy 100 BTC at a price of 20,000 USDT, the execution might unfold as follows:

  • 40 BTC of the order gets matched with a sell order at the price of 20,000 USDT;
  • 30 BTC of the order gets matched with a sell order at the price of 20,001 USDT;
  • 30 BTC of the order gets matched with a sell order at the price of 20,002 USDT.

In this case, the average execution price becomes 20,000.9 USDT, which is higher than the requested price (20,000 USDT), resulting in a slippage of 0.9 USDT.

(2) Intense market volatility
The strong volatility in the cryptocurrency market can prompt slippage if the market price changes after a user places an order. Using the same example as above, if a user intends to buy 100 BTC at a price of 20,000 USDT, at the order placement time, BTC bid/ask prices are posted as 19,990.50 USDT/20,000 USDT on the order book. In volatile markets, price fluctuations can happen quickly, even within the few seconds required to fill an order. Besides, the order can impact the market by providing information that high-frequency traders can take advantage of when frontrunning.
In the example, high volatility in the BTC market incurs a fast price shift caused by high-frequency trades before the order gets filled. This results in the bid/ask prices changing to 20,000.5 USDT/20,001 USDT. The order is then filled at 20,001 USDT, incurring an extra cost of 1 USDT per BTC for a total of 100 USDT negative slippage on the 100 BTC order.

2. How to Avert Slippage
(1) Guaranteed price feature exclusively on BingX to avoid slippage losses
If you want to eliminate slippage, we recommend ticking the "Guaranteed SL" when you set up Stop Loss (SL). This guarantees that your SL order will be executed at the exact expected price.
This feature supports Guaranteed Price for Trigger Orders and Guaranteed SL for SL orders. It is currently available for the following trading pairs: BTC, ETH, XRP, SOL, LTC, BCH, ADA, BNB, MATIC, RNDR, DOGE, and LINK. More pairs will be supported, stay tuned.
See also: Perpetual Futures Upgrade: Exclusive Guaranteed Price Launched to Prevent Slippage Losses

(2) Opt for Limit Order over Market Order
Different from a market order which is filled at the best available price, a limit order is preset with a specific price and you will trade only at your requested price. Note that this doesn't guarantee your whole order will fill at your requested price, and only a partial amount may be executed.

(3) Do your own research when choosing a trading platform
Slippage is prevalent throughout cryptocurrency trading, whether you're an institutional investor or a retail customer. BingX deeply understands that the transaction cost is a major consideration to users, therefore it has been seeking and partnering with top liquidity providers to enhance its market liquidity and deliver the best bid and offer prices. Also, it will effectively lower the occurrence of unfilled/partially filled orders at set prices by trading when the market is stable, further mitigating the risk of slippage.

(4) Split a large order to smaller ones
Large orders are more prone to slippage risks given the typically increased latency of their execution and their need to absorb more liquidity. Instead of placing a large bulk order, spreading its execution over time and across exchanges gradually can effectively cope with slippage risks.
You can also use Algorithmic Trading Strategies (ATS) like Volume Participation (VP) and Time-Weighted Average Price (TWAP) to help efficiently execute your orders and avoid slippage in the same manner.

If you have any doubts or opinions regarding the liquidity of cryptocurrencies when trading Perpetual Futures, feel free to share your feedback with us.
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Cryptocurrency prices are subject to high market risk and price volatility. You should only invest in products that you are familiar with and where you understand the associated risks. You should carefully consider your investment experience, financial situation, investment objectives and risk tolerance and consult an independent financial adviser prior to making any investment. This material is for reference only and should not be construed as financial advice. Past performance is not a reliable indicator of future performance. The value of your investment can go down as well as up, and you may not get back the amount you invested. You are solely responsible for your investment decisions. BingX is not responsible for any losses you may incur.
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