Discover the ins and outs of Proof of Work, the consensus mechanism that powers the Bitcoin network and other cryptocurrencies. Learn about its benefits, limitations, and impact on the environment in this comprehensive guide.
What is the Slippage?
Slippage is a term describing the difference between the expected price of a trade and the price the trade actually executes at. Slippage often occurs during periods of high market volatility, or when there is a large difference in the amount of buy and sell orders on the market. It can also occur when a market order is placed on a cryptocurrency exchange. Slippage is a normal and expected part of trading in any market, but can be a frustrating experience for traders when it results in a trade executing at a worse price than expected.
In the cryptocurrency market, slippage can be exacerbated by the lack of liquidity on many exchanges. When buying or selling cryptocurrencies, it is important to take slippage into account when setting your price expectations. It is also important to remember that market orders come with inherent risks, as they will always execute at the best available price, even if that price is much worse than the price you were hoping for. If you are looking to avoid slippage as much as possible, it is best to place limit orders rather than market orders. Limit orders allow you to set the maximum price you are willing to pay (or the minimum price you are willing to sell at), ensuring that your trade will only execute at that price or better. However, limit orders may not always execute immediately, and you may have to wait for the price to reach your limit before your order is filled. Another way to avoid slippage is to trade on exchanges with high liquidity, which will make it easier to find buyers or sellers to match your trade at the price you want.
Trading on multiple exchanges can also help you avoid slippage, as you can place an order on one exchange and then wait for it to be filled on another. In general, slippage is something that all traders should be aware of and take into account when trading. While it can be frustrating when it results in a trade executing at a worse price than expected, it is a normal part of trading in any market. By understanding how slippage works and taking measures to avoid it, you can minimize its impact on your trading.
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