How do I accurately calculate slippage if the crypto coin is volatile?

Asked 2 years ago

Hi, I have some experience with exchanging on a DEX, however, I find myself battling with the slippage. I thought I calculated the percentage correctly when I set the slippage tolerance, and I've gone back to double-check my calculations, but I don't see any errors. The only thing that makes sense tome is that it must've been due to the volatility between either Dogecoin or Tether because these are the two I was working with. Is there a different formula for calculating slippage when exchanging volatile crypto coins?

Reid Hart

Thursday, September 22, 2022

You can accurately calculate slippage for a volatile asset by using a guaranteed stop and limit order. Since an order with a guaranteed stop is processed at the expected price, the slippage risk is mitigated. But you will incur a premium linked to the guaranteed stop when activated. A limit order can help reduce the risk of slippage when investors enter a trade or seek to benefit from a successful trade.

When a limit order is initiated, it will be filled at the expected price or one that slightly differs. This means the execution of a sell order occurs at the set price or a closely similar price, while the execution of a buy order happens at the excepted price or a closely similar range.

Write an answer...


Please follow our  Community Guidelines

Can't find what you're looking for?