Slippage

The Two Main Causes of Slippage

1. Market Volatility During Block Inclusion: Between the millisecond you submit a swap and the moment a block validator confirms it onchain, other traders may execute orders that move the market price.
2. Price Impact from Liquidity Pool Depth: When buying a large position in a small liquidity pool on a decentralized exchange (like Uniswap or Raydium), your own order consumes available liquidity, pushing the execution price significantly higher against yourself.

Slippage Tolerance Settings

When trading on decentralized exchanges, you manually define your Slippage Tolerance (typically 0.1 to 1.0 percent):

1. If Price Moves Within Your Tolerance: The transaction executes successfully.
2. If Price Moves Beyond Your Tolerance: The smart contract automatically cancels the transaction, refunding your tokens and protecting you from massive unexpected price spikes.

The Danger of High Slippage (MEV Sandwich Attacks)

Setting your slippage tolerance too high (such as 5 to 15 percent) is the number one mistake made by memecoin traders: 1: Automated MEV (Maximum Extractable Value) searcher bots detect your transaction sitting in the public mempool.

1. The bot frontruns your trade to push the price up to your maximum slippage limit and instantly sells back to you, extracting guaranteed profit directly from your balance.
2. Rule: Keep slippage under 0.5 to 1.0 percent whenever trading established tokens, and use private RPC endpoints when available.

Learn how to trade safely on decentralized exchanges in our Complete Guide to Onchain Analysis and DEX Trading.