A must-read for newbies in the crypto world: How much money will spreads and slippage take away from you?

When trading in the crypto world, the price you see is often not the price you get. Two hidden costs are at play: spread and Slippage.

What is spread?

The difference between the buying price and the selling price is called the spread. For example, buying BTC at $100,001 and selling it at $99,999 results in a spread of $2. Coins with good liquidity (like BTC) have a narrow spread, while small coins with poor liquidity can have an absurdly wide spread.

The narrower the spread = the better the market liquidity = the more intense the competition among large players. This is why trading mainstream coins is comfortable, while small coins are prone to being cut.

Slippage is the real killer

You wanted to buy in for $100, but the execution price was $102. This difference is called Slippage. Especially in DEX (decentralized exchanges) and during times of high market volatility, slippage can reach up to 10%.

Common Causes of Slippage:

• The liquidity pool is too shallow (small coin)
• The market is too volatile
• Your order is too large to fill the entire order book.

How to reduce losses?

1. Split Orders - Do not place a large order all at once, split it into several smaller ones.
2. Choose mainstream coins - The spread and slippage for BTC/ETH are the smallest.
3. Use limit orders - Although it may take longer to fill, you won't be hit by Slippage.
4. Pay attention to gas fees - Gas fees on DEX can sometimes be more expensive than slippage.
5. Avoid low liquidity assets - Unless you are a market maker

Slippage may seem small, but a large order can wipe out your entire profit. Be sure to check it once before making a big operation.