Takah Rahman
1 post
Nov 13, 2025
12:43 AM
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Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. In the high-speed, decentralized world of Forex and Crypto, slippage is an unavoidable reality. It can erode your profits, widen your losses, and ultimately determine the success of a trade.
As your dedicated analysis tool,
Backcom App
guides traders in optimizing this critical setting. Setting the right tolerance is a delicate balance between execution speed (ensuring the trade is filled) and price quality (ensuring a favorable fill price).
The Core Dynamics of Slippage in Trading
To set the right tolerance, you must first understand the main drivers of slippage.
The Two Main Causes of Slippage
Market Volatility: This is the primary culprit. When major news hits the Forex market (e.g., interest rate decisions) or when Crypto coins experience flash crashes or pumps, prices move so rapidly that the quoted price instantly becomes outdated. High volatility = High Slippage Risk.
Lack of Liquidity: This is especially relevant in Crypto and less-popular Forex pairs (exotic crosses). If there aren't enough buyers or sellers at your target price, your order must be filled by marching down the order book, consuming multiple price levels and resulting in a less favorable average execution price. Low liquidity = High Slippage Risk.
Positive vs. Negative Slippage
Slippage isn't always bad:
Negative Slippage (The Cost): You buy at a higher price or sell at a lower price than expected. This is the common form that hurts profitability.
Positive Slippage (The Benefit): You buy at a lower price or sell at a higher price than expected. This is a favorable outcome, often possible when trading with fast-execution brokers during rapid but controlled market movements.
Finding the Optimal Slippage Tolerance Setting
The best slippage tolerance is not a single number; it's a dynamic range based on market conditions and the asset you are trading. For most retail traders, Backcom App recommends starting with the default settings and adjusting only when necessary:
Forex Majors (EUR/USD, GBP/USD): These are highly liquid. A slippage tolerance set to the equivalent of 2 to 5 pips (or often a very low percentage like 0.1%) is usually sufficient. A tighter setting minimizes negative slippage without causing excessive execution failure.
Crypto (CEX/CFDs on Bitcoin/Ethereum): While volatile, centralized exchanges (CEXs) often have deep liquidity. A standard tolerance of 0.5% to 1.0% balances execution speed with price quality.
Decentralized Exchanges (DEXs): This is where slippage is most critical. DEX trading involves swapping tokens within a liquidity pool, and the price impact is heavily dependent on the trade size relative to the pool size.
Stablecoins/Major Pairs: Use the lowest possible setting, usually 0.1% to 0.5%.
New/Volatile Altcoins: You may need to use a wider setting, potentially 2.0% to 5.0%, to ensure the transaction goes through, especially if the liquidity pool is shallow. Be extremely cautious with higher settings as this exposes you to significant price erosion.
Read more:
Strategies to Minimize Slippage (Beyond Tolerance)
Adjusting tolerance is a reaction; proactive strategies are the best defense against slippage:
Prioritize Limit Orders: The single best way to avoid negative slippage is to use a Limit Order instead of a Market Order. A Limit Order guarantees you will get the price you requested or better, though it risks the order never being filled.
Avoid High-Impact Events: Do not use Market Orders immediately before or after high-impact economic news releases. Wait for the initial market volatility to subside, as this period sees the highest rates of slippage.
Trade During Peak Liquidity: For Forex, trade during the London/New York session overlap (roughly 8 AM to 12 PM EST). For Crypto, trade when the global market is most active. High liquidity narrows spreads and reduces slippage.
Break Down Large Orders (Especially on DEXs): If you are trading a very large size relative to the asset's volume, split the trade into smaller orders. This minimizes the impact of your single order on the order book.
Conclison
Backcom App believes that successful trading comes from controlling variables. By understanding the causes of slippage and setting your tolerance appropriately especially favoring Limit Orders when possible you take control of your execution quality, moving from a reactive trader to a strategic operator.
Author: Takah Rahman
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