Slippage in Cryptocurrency: Tips on How To Avoid It

You can trade cryptocurrencies through an exchange, or as a CFD with any broker you choose. Negative slippage is one of the risks associated with crypto trading. The crypto market is volatile and can see large fluctuations in the price of crypto assets within a short time. Slippage in cryptocurrency refers to the difference between the price a crypto asset at the time you place the trade and the actual execution of the transaction. Slippage does not only apply to cryptocurrency, but also to other financial markets. The crypto trader needs to be very conscious of slippage because many times the volatility of the crypto market surpasses other financial markets (like forex) and slippage can have a tangible impact on profitability.Slippage is mostly determined by the volatility and liquidity of any financial instrument. The crypto market is still relatively young compared to other established financial markets such as stocks and forex. Small news announcements can dramatically increase volatility, causing prices to experience extreme highs and lows. Slippage is also determined by the number and quality of buyers and sellers for a particular crypto asset. Low liquidity refers to a lack of buyers or sellers to fill orders at the requested price. This can lead to high slippage. Slippage can be either negative or positive. Many crypto traders set their slippage tolerance to avoid slippage when trading crypto assets. This tells your broker or exchange to only execute trades if you have a slippage tolerance. You can trade with trusted no slippage brokers to avoid the stress of monitoring slippage. Orders are fulfilled at a lower price than the original price. Negative slippage can cause massive losses if it is not controlled. It is difficult to predict whether a particular crypto trade will experience negative or positive slippage before it is actually executed by the broker or exchange. It may not be possible for the crypto market to avoid slippage completely, but there are ways to minimize losses due to slippage.Monitor Crypto News and Events Slippage in the crypto market is influenced by volatility. Slippage can occur when crypto assets are subject to large fluctuations due to major announcements or events. Some crypto traders may be able to experience huge positive slippage during periods of increased volatility. Negative slippage is also very possible. It is important to keep track of crypto news and events in order to minimize losses due to negative slippage. You can follow popular crypto blogs and Twitter to keep up with crypto news. You can also choose to avoid trading during major events such as the fed meeting. Another way to minimize slippage is to only trade cryptocurrencies that have high liquidity. It can be tempting to invest in less popular cryptocurrencies, which are often lower priced. It is difficult to trade these less-popular cryptos because they have lower trading volumes and are more susceptible to slippage. It is best to trade high-liquidity cryptos like BTC/USD and ETC/USD. Also, avoid placing market orders. So far, we have only discussed ways to minimize slippage losses. Limit orders can be used to eliminate any negative slippage in the crypto markets. A limit order allows you to set a trade that will be executed at a future price, while a market or order is executed immediately after it has been opened. Although the idea of using a limit or limit order sounds great, there is no guarantee that any particular crypto asset will reach the limit order price. The main factors that affect the slippage value of the crypto market are volatility and liquidity. Slippage is a normal part crypto trading and can either be positive or negative. Positive slippage is a common part of crypto trading and it is unlikely that investors will be unhappy with it. This gives them a better deal than the initial price they were planning to trade at. It is difficult to minimize or eliminate unplanned slippage losses, which can be very frustrating. After implementing ways to avoid slippage, it is still advisable to always set your slippage tolerance before initiating any crypto trade with an exchange or broker.Tags: # Cryptocurrencieslow liquiditySlippageTrading