Why knowing what slippage means could save you $400,000

[Mr_Akbar]

Not understanding the concept of slippage cost this guy $400,000. That’s a really expensive way to learn that lesson, so I’m offering up a different way.

In order to understand slippage, you need to understand the difference between limit and market orders as a foundation. A “limit” or “maker” order is essentially advertising that a trader is willing to transact at that price, and is waiting for a “taker” or ”market” order to take them up on it. A market order will fill immediately at the best available price.

The way a market order executes the “best available price” is what creates slippage. If there aren’t enough limit orders advertising that they’re willing to transact at the best possible price, a market order will then automatically fill as much as possible at the best price, and then continue filling the second best price, the third, and so on. I’m a numbers guy so I’ll provide an example of how that works.

Imagine that Coin A is currently trading at 100 satoshis. You have 1,000,000 coins, worth 1 BTC. There are limit buy orders for 250,000 coins at each 100 sats, 99 sats, 98 sats, and 97 sats. If you market sell your 1,000,00 coins, your order will fill each of those four limit orders for a total of 0.985. The average sell price for those coins is 1.5% lower than the highest original limit buy order at 100 sats. It can be said then that your slippage was 1.5%.

If in that same scenario you decide to place a limit sell at 100 sats, your sell order would immediately fill the 250,000 coin limit buy order at 100 sats. The remaining 750,000 coins would be listed as for sale at that price, waiting for another trader to take you up on that offer and buy your coins.

Relying on another trader to fill your order is a risk and may take some time, which is why some traders prefer to absorb the cost of slippage instead. This is especially true in highly volatile markets where price can turn on a dime.

In the case of the guy who lost $400,000 to slippage, he got a taste of what can happen at the extremes. In this case, he made such a large market buy that the only sell orders to take were at absurd and unrealistic prices. It's unfortunate that they made such a costly mistake, but hopefully other traders can learn from his poor example.

If learning how to trade is something that interests you, check out Voodoo Crypto.

[traderethereum]

I think that is his mistake for being greedy to chase a bigger profit.
I don't read all of the posts, but when I check the image, I see that the price can jump in shortly and maybe that is why he is losing his money.
I thought when we want to buy a token in IEO, we can buy at the IEO price and I wonder how he can make a mistake.
Or if he buys the coins at a low price and in the next minute, there is a big pump that could push the price to the highest price in an instant, then it's not advisable if he decides to enter the market.
He needs to wait for a while because the big pumps will not stay for a long time and it should down in the next minutes.

[Mr_Akbar]

I think that is his mistake for being greedy to chase a bigger profit.
I don't read all of the posts, but when I check the image, I see that the price can jump in shortly and maybe that is why he is losing his money.
I thought when we want to buy a token in IEO, we can buy at the IEO price and I wonder how he can make a mistake.
Or if he buys the coins at a low price and in the next minute, there is a big pump that could push the price to the highest price in an instant, then it's not advisable if he decides to enter the market.
He needs to wait for a while because the big pumps will not stay for a long time and it should down in the next minutes.

There have been a few theories about why this particular situation happened, including whether it was related to the Binance hack. Ultimately it was a great excuse to talk about an underrated yet important topic.

[PuertoLibre]

Slippage is possible under the volatile market conditions and no one can guarantee the same price on the fair market. It is only possible to take the best available price on the order book which is full of stop, limit orders. News trading is an ideal condition for understanding the effect of slippage on the competitive markets. Price can jump to the next accumulation point where the majority of orders stay without processing the orders of other market participants.

[xvids]

The post is humorous I mean yeah it is an expensive lesson but honestly this guy is insane,
Why would he even trade when he doesn't know how it works ,
This is why you should study first before entering the market .

[Tytanowy Janusz]

What was this guy order size $2 Mil ? He has to eat all walls and after that pump price very high and on top of that buy bunch of coins to lose 400k$. To create that big buy order on small coin he has to be inexperienced and careless. Being inexperienced and careless while dealing with $2Mil order makes him stupid. Buying coins worth that much takes hours, days or even weeks on low volume coins to do it optimally and he created it in one order... was that his first order?

Similar issues happens every time binance lists new coins ... when someone is buying at x10 price due to market buy order:
https://bitcointalk.org/index.php?topic=5124442.msg50307726#msg50307726

[Ailmand]

Well, this guy must have been impatient filling his order. He must be new in trading and he doesn't know how trading platform works. That is why it is never adviced to start trading with huge amount of money, not unless you know what you are doing and willing to take the risk. That is a huge amount of money, and it's an expensive way to learn.

[Haunebu]

The post is humorous I mean yeah it is an expensive lesson but honestly this guy is insane,
Why would he even trade when he doesn't know how it works ,
This is why you should study first before entering the market .

Agreed. Such people do exist in this world. Almost half a freaking million dollars gone just like that. I don't think this guy would ever want to trade ever again. This is why I always advise doing your research before investing in any financial market(crypto, forex etc) and experience also plays a big role in this aspect.

[guoyu78]

You know some people are fond of making mistakes that lead them to trouble and these mistakes are done out greed. There are people that goes for a higher price and ends up losing everything because volatility can cause the price of coins to plummet and you will just end up losing a lot out of your money. Anyone who is trader that really wish to be successful in their trade has to be careful and make their choice wisely, and not out of greed, cause greediness can lead to a heavy loss.

[Mr_Akbar]

The post is humorous I mean yeah it is an expensive lesson but honestly this guy is insane,
Why would he even trade when he doesn't know how it works ,
This is why you should study first before entering the market .

Hopefully people can learn from his stupidity and seek out education and training before trading recklessly.

What was this guy order size $2 Mil ? He has to eat all walls and after that pump price very high and on top of that buy bunch of coins to lose 400k$. To create that big buy order on small coin he has to be inexperienced and careless. Being inexperienced and careless while dealing with $2Mil order makes him stupid. Buying coins worth that much takes hours, days or even weeks on low volume coins to do it optimally and he created it in one order... was that his first order?

The market that he tried to buy on was very illiquid, meaning that there were very few orders on the book to buy. You're right that buying a lot of an illiquid coin takes a long time, and this person's impatience ended up costing them a lot of money.

Agreed. Such people do exist in this world. Almost half a freaking million dollars gone just like that. I don't think this guy would ever want to trade ever again. This is why I always advise doing your research before investing in any financial market(crypto, forex etc) and experience also plays a big role in this aspect.

I don't know that he has much left to trade with...

But really, DYOR is no joke. That applies to both the coins you invest in and the way you go about investing in them. Education is critical.

You know some people are fond of making mistakes that lead them to trouble and these mistakes are done out greed. There are people that goes for a higher price and ends up losing everything because volatility can cause the price of coins to plummet and you will just end up losing a lot out of your money. Anyone who is trader that really wish to be successful in their trade has to be careful and make their choice wisely, and not out of greed, cause greediness can lead to a heavy loss.

Amen to that, don't get too greedy. A little bit of greed is a good motivator, though...