Market Order Slippage
Market order slippage is the difference between the expected price of a trade and the actual price at which it is executed. This occurs when there is insufficient liquidity at the best available price, forcing the order to be filled at progressively worse prices.
Slippage is a significant risk for traders, particularly in volatile markets or when trading illiquid assets. It is often a direct result of aggressive execution that consumes available depth.
Minimizing slippage is a primary goal of execution algorithms, which aim to manage trade size relative to available liquidity.
Glossary
Order Book Depth
Depth ⎊ In cryptocurrency and derivatives markets, depth refers to the quantity of buy and sell orders available at various price levels within an order book.
Market Makers
Liquidity ⎊ Market makers provide continuous buy and sell quotes to ensure seamless asset transition in decentralized and centralized exchanges.
Price Discovery
Price ⎊ The convergence of market forces, particularly supply and demand, establishes the equilibrium value of an asset, a process fundamentally reliant on the dissemination and interpretation of information.
Price Impact
Impact ⎊ Price impact refers to the adverse movement in an asset's market price caused by a large buy or sell order.
Automated Market Makers
Mechanism ⎊ Automated Market Makers (AMMs) represent a foundational component of decentralized finance (DeFi) infrastructure, facilitating permissionless trading without relying on traditional order books.
Execution Price
Definition ⎊ This term refers to the final monetary amount at which a trade is transacted, representing the bridge between a theoretical order and a settled position.
Decentralized Exchanges
Architecture ⎊ Decentralized Exchanges represent a fundamental shift in market structure, eliminating reliance on central intermediaries for trade execution and asset custody.
Order Size
Asset ⎊ Order size, within cryptocurrency and derivatives markets, fundamentally represents the quantity of an underlying asset or contract specified in a single trade instruction.
Order Book Density
Depth ⎊ Order book density, within cryptocurrency markets and derivatives, quantifies the concentration of limit orders across various price levels.
Order Book
Structure ⎊ An order book is an electronic list of buy and sell orders for a specific financial instrument, organized by price level, that provides real-time market depth and liquidity information.