The short version: Slippage is the difference between the price you expect and the price you actually get. On DEXes, you set a "slippage tolerance" to control how much price movement you'll accept.
What Causes Slippage?
When you trade on a decentralized exchange like Jupiter, you're not trading against other people's orders (like on Coinbase). You're trading against liquidity pools - smart contracts that hold reserves of tokens.
Here's why prices change:
- Your trade moves the price - Larger trades have more impact on the pool
- Other traders - Someone might trade before your transaction confirms
- Market movement - Prices change constantly, especially for volatile tokens
- Low liquidity - Tokens with small pools have bigger price swings
Simple Example
You want to buy a token at $1.00. You set 1% slippage tolerance.
- Your transaction will execute if the price is between $0.99 and $1.01
- If the price moves to $1.02 before your trade confirms, the transaction fails
- You don't lose money - you just don't get the trade
How Slippage Works on Jupiter
Jupiter (and most Solana DEXes) lets you set your slippage tolerance before every swap. You'll see it as a percentage, typically ranging from 0.1% to 50%.
Where to Find It
- Open Jupiter at jup.ag
- Click the gear icon (settings) near the swap button
- You'll see "Slippage Tolerance" with preset options
- Choose a preset or enter a custom percentage
What Slippage Setting Should You Use?
| Slippage | Best For | Risk |
|---|---|---|
| 0.1% - 0.5% | Major tokens (SOL, USDC) with high liquidity | Trades may fail often |
| 0.5% - 1% | Most normal trading situations | Good balance |
| 1% - 3% | Smaller tokens, moderate volatility | Some price impact accepted |
| 3% - 10% | Very small or volatile tokens | Significant price difference possible |
| 10%+ | Extreme cases only | High risk of bad fills |
Start with 0.5% to 1% slippage. If your transaction keeps failing, increase it slightly. For tokens with buy/sell taxes, you may need higher settings (the tax counts toward slippage).
Why High Slippage Can Be Dangerous
Setting very high slippage (like 20% or 50%) means you're accepting a potentially much worse price. This can lead to:
- Sandwich attacks - Bots detect your pending trade and manipulate the price
- Much worse execution - You might pay 15% more than expected
- Significant losses - On larger trades, this adds up fast
If a token requires 10%+ slippage to trade, it usually has a built-in tax. This tax goes to the token creators. Some legitimate tokens have small taxes (1-3%), but very high required slippage is often a red flag for scam tokens.
When Transactions Fail
If your trade fails due to slippage, you'll see an error message. On Solana, you'll still pay a small transaction fee (usually less than $0.01), but you won't lose your tokens.
Common reasons for failed transactions:
- Price moved too fast - Market is volatile
- Slippage too low - Increase it slightly and try again
- Low liquidity - Try a smaller trade size
- Token has tax - You need to account for buy/sell taxes
Slippage vs Price Impact
These terms are related but different:
- Slippage tolerance - How much price change you'll accept (your setting)
- Price impact - How much YOUR trade will move the price (shown before you swap)
Jupiter shows you the estimated price impact before you confirm. If you see "Price Impact: 5%", your trade alone will move the price by 5%. For larger trades on low-liquidity tokens, this can be significant.
If price impact is over 1-2%, consider breaking your trade into smaller chunks. This often results in better average prices.
Summary
- Slippage is the difference between expected and actual price -- understanding it is key for DEX trading signals
- Set slippage tolerance to control how much difference you'll accept
- 0.5% to 1% works for most trades
- Higher slippage = more likely to fill, but potentially worse price
- Very high slippage requirements can indicate scam tokens
- Always check price impact before large trades