@drdavi
🔹 Slippage
Definition: The difference between the expected price and the executed price of your trade.
Cause: Other people’s trades or on-chain delays between quote and execution.
Fix: Set a slippage tolerance (e.g., 0.5%, 1%, 3%) to prevent excessive losses from external price changes before your trade confirms.
Key point:
➜ Slippage tolerance does not protect you from the effect of your own large trade.
🔹 Price Impact
Definition: The change in token price caused by your own trade.
Cause: Low liquidity in the pool or a large trade size.
Example:
If a pool has only $10,000 in liquidity and you swap $2,000, your own trade can drastically change the price curve (especially in AMMs like Uniswap or PancakeSwap).
🔹 Liquidity
Definition: The total amount of tokens available for trading in a pool (AMM) or on an order book (CEX).
Effect:
High liquidity → small price impact and stable prices.
Low liquidity → large price impact and volatile prices.
So, why you “got rekt” even with 3% slippage:
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