# 2.9 What Is Slippage?

Slippage occurs when the execution price of an order differs from the expected price. This phenomenon is most common during periods of high market volatility or low liquidity.

**How Does Slippage Work?**

When you place an order to buy or sell an asset, the system aims to execute it at the best available price. However, if the asset’s price changes rapidly or there aren’t enough orders in the order book, your order might be executed at a price different from the one you initially specified.

Example:

* You place a market order to buy BTC at $30,000.
* By the time the order is executed, the price has increased to $30,050.
* The $50 difference is the slippage.

**Main Causes of Slippage**

1. High Volatility:
2. * Rapid price movements can result in the asset’s current price changing before your order is executed.
3. Low Liquidity:
4. * If there aren’t enough buy or sell orders in the order book, large orders may "move through" multiple price levels, altering the final execution price.
5. Use of Market Orders:
6. * Market orders are executed at the best available price, making them more prone to slippage, especially during low-liquidity periods.

**Types of Slippage**

1. Positive Slippage:
2. * The order is executed at a more favorable price than expected (rare but possible).
3. Negative Slippage:
4. * The order is executed at a less favorable price than expected (more common).

**How to Minimize Slippage**

1. Use Limit Orders:
2. * Limit orders execute only at your specified price or better, preventing unexpected deviations.
3. Trade on Liquid Markets:
4. * Choose markets with high liquidity, where the number of buyers and sellers minimizes price gaps.
5. Avoid Trading During High Volatility:
6. * Events like economic news releases can drastically increase slippage risks.
7. Monitor Order Size:
8. * Large orders can impact the market, especially on platforms with low liquidity.

**Why Is Slippage Important?**

Slippage can significantly affect a trader's profits or losses, especially with frequent trading. Understanding and managing the risks of slippage is crucial for success in markets like futures or spot trading.

Electra is dedicated to minimizing slippage by providing high liquidity and a robust trading infrastructure, ensuring a smoother trading experience for all users.
