How do I accurately calculate slippage if the crypto coin is volatile?
Asked 3 months 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.
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