Before using the slippage setting, you must understand how changing the settings will determine the number of tokens you receive. It also helps to understand the conditions in which it is optimal (or sub-optimal) to place orders. Without this understanding, you can lose out on a lot of equity when buying or trading an asset.
What is Slippage?
Slippage is the difference between the expected price of a trade and the executed price of that trade. It is more likely to happen when there is a higher level of volatility, such as breaking news that forces unexpected trends in the market.
This condition can make it extremely unlikely to be able to execute any trades at the expected price. Slippage can be a direct result of a speculator/trader using market-orders to enter or exit a position.
It is also likely to happen when large orders are triggered while there is a lack of volume at the selected price to maintain the current bid/ask spread. The spread refers to the difference between the ask and bid prices of an asset.
The difference between the mid-price and the execution price of a trade. You probably are familiar with the warning below before completing a big trade on Uniswap:
This transaction will not succeed either due to price movement or fee on transfer. Try increasing your slippage tolerance.
Minimizing the Effects of Slippage
One method of limiting the effects of slippage is to avoid market-orders under volatile market conditions. Refrain from placing market-orders unless they are necessary, utilize the limit-orders instead.
A Limit-order, on the other hand, will only be filled at the price you choose, or better. They can’t be filled at a worse price, making slippage an impossible outcome.
Why is my swap failing or stuck?Uniswap | FAQ
You might be trying to swap a fee on transfer or deflationary token. If so, you have to increase your allowed slippage to account for the fee taken during the swap. Click on the gear for settings and adjust Slippage tolerance accordingly.
Slippage Tolerance is the set range of the expected number of tokens you would receive, given your selected parameters. You set the limits of what you are willing to accept, whether higher or lower than the current rate. Select a Slippage Tolerance of 5% to receive a total of tokens that could be 5% lower or 5% higher than the initial amount shown.
In this example, we can see that at the current Price Impact of 0.1%, 546.377 SWFL tokens will cost a total of 0.09977595 ETH. If this condition cannot be met, the trade will NOT go through.
You can see how the difference in the “Minimum Received” amount has changed from the previous example. The change in Price Impact going from <0.01% to 1% would result in fewer tokens for the same amount of ETH.
With the slippage rate now being increased from 0.1% to 1%, 545.8 SWFL tokens have now been reduced to 540.9 SWFL tokens. With the current Price Impact at 1%, a minimum of 540.9 SWFL will now be swapped for the same 0.09977595 ETH.
A minimum exchange of 545.8 SWFL tokens decreased to a total of 540.9 SWFL tokens. With the current Price Impact at 1%, compared to the <0.01% rate, you would now receive a fewer amount of the digital assets for the same 0.09977595 ETH paid.
Always remember that this can go both ways, in either direction.
Setting the Slippage Tolerance on Uniswap
Click the gear icon on the upper, right-hand corner of the Uniswap page to access the transaction settings of Uniswap.
Enter your desired Slippage Tolerance or use the default settings.
If you wish to increase the Slippage Tolerance past 1%, you can enter a specific percent that isn’t one of the three preset options.
The final step is to click “Confirm Swap” once you have established your Slippage Tolerance and the number of tokens you are looking to acquire.
Be sure to check out Swapfolio App dashboard to monitor the gas recommendation any time you are attempting to swap assets on Uniswap.
That’s it. Now that you have a full understanding of what slippage is, how to combat it, and how to use the slippage settings, you are very unlikely to make a costly error that causes you to receive fewer tokens than you deserve to get.
The Most Efficient & Effortless Way to Buy/Trade
With the Swapfolio app, rest assured you will be in a better position than those who strictly interact with the Uniswap Protocol via Metamask. Although Limit-orders will always be subject to some slippage on Uniswap (it’s part of Uniswap’s algorithm), you’ll still get an advantageous price, despite being executed on Uniswap.
Along with Limit-orders, Stop-loss and Take-profit orders are also at your disposal to increase profitability and decrease risk. Sign up for early access to the Alpha release, open now. The Alpha version will ready in early October. Remember to stay connected with our social media accounts for the latest updates and news.