What is Slippage?

Slippage is the difference between the price you expected for a trade and the price you actually got. On an order book it happens when an order is large enough to consume several price levels; on an automated market maker it happens on every trade, because the formula moves the price as the trade executes, and it grows with the size of the trade relative to the pool. Thin liquidity means large slippage; deep liquidity means little.

Most interfaces let you set a slippage tolerance, the maximum worse-than-quoted price you will accept before the transaction fails. Set it too low on a volatile pair and the trade reverts; set it too high and a front-runner can push the price against you and let your trade fill at the worst price you allowed. The tolerance is a real risk parameter, not a nuisance setting. A market order on a thin pair is the classic way to discover it: the fill lands several percent from the last trade because the order ate every level on the way.

Slippage is a cost of trading, in the same way fees and gas are. A position entered with meaningful slippage has a worse cost basis than the quoted price suggests, and a strategy that trades often on thin pools can lose more to slippage than to the market. It belongs in the honest accounting of what a trade cost. On chains where the pending pool is public, a large pending swap is visible to anyone, and bots profit from placing trades around it; a tight tolerance is the only defense a user controls.

TrueHold records swaps at the price they actually executed, read from the chain or the exchange, so cost basis reflects what was paid rather than what was quoted.

Limit orders on order-book venues avoid slippage entirely by refusing to fill at a worse price, at the cost of possibly not filling at all.