What is Slippage in Altcoin Trading?
Slippage is a common phenomenon in the trading of altcoins and refers to the difference between the expected price of a trade and the actual price at which the trade is executed. This discrepancy usually occurs during periods of high volatility, when the market is moving rapidly, or when the liquidity of the altcoin being traded is low.
When investing in altcoins, traders often set specific prices at which they want to buy or sell their assets. However, due to market fluctuations or inadequate order book depth, the execution price may differ from the desired price, leading to slippage. This can result in unexpected losses or gains.
There are two types of slippage: positive and negative. Positive slippage occurs when the executed price is better than the expected price, while negative slippage happens when the execution price is worse. Understanding slippage is crucial for traders, as it can affect overall trading performance and investment returns.
To mitigate slippage, investors can adopt strategies such as using limit orders instead of market orders, trading during periods of high liquidity, and being mindful of the altcoins they choose to invest in. Awareness of slippage helps traders make informed decisions and manage risk effectively.