What is slippage?
If you spent any time on prediction market websites recently, or searched for things like “how does Kalshi work?” you’ve probably already come across the term “slippage.” At first glance, it can sound a bit technical or even slightly intimidating. But in reality, it’s a simple concept that plays an important role in how you buy and sell event contracts.
Let’s start with a clear definition to help you understand slippage better. The term refers to the difference between the price you expect to pay for an asset and the price at which your trade is actually executed. This can happen in any type of market where prices move in real time.
For example, you might attempt to purchase a contract at $0.50, but by the time the trade actually goes through, the price has changed to $0.52. This small difference is what we call slippage. It’s important at this stage to point out that slippage isn’t always negative. In some cases, you might receive a better price than expected, but this isn’t overly common.
What does slippage mean in trading?
So what does slippage actually mean when it comes to trading? In any market, including areas like prediction markets, prices are constantly changing based on supply and demand. When you place an order, there’s often a brief delay before it’s matched with another user, and during that time, the price can shift.
This is especially relevant when trading event contracts. On prediction market websites, the price reflects the current consensus about the likelihood of an outcome. As more users buy or sell contracts, those prices adjust accordingly.
Therefore, when we talk about slippage in trading, we’re talking about that gap between the price you saw when you decided to trade and the price you ultimately receive when the transaction has been completed.
What is slippage in prediction markets?
You may have wondered
how Polymarket works
and how slippage affects these platforms. Basically, Polymarket is a prediction market site that lets you buy contracts on event outcomes, and slippage is the difference between the price you expect and the price you actually get. Many
prediction market guides
will tell you that slippage works in much the same way as it does with trading, but with a few subtle differences.
Each market asks a question about a future event and assigns a price to possible outcomes. These prices change as users buy and sell contracts, reflecting shifts in collective opinion.
Because of this dynamic pricing, slippage can occur when:
- A market is particularly active
- Large trades are being placed
- New information causes rapid changes in opinion or sentiment
For example, if you attempt to buy a Yes contract on a sports event at $0.60, but demand increases at the same time, you may end up purchasing it at $0.63 instead. In this example, slippage is simply a natural result of how
cftc prediction markets
operate, as prices are not fixed and they move in response to real-time activity.
What is crypto slippage?
A lot of the prediction market websites we use operate with cryptocurrencies, which adds yet another layer to consider. Crypto slippage refers to the same concepts but within
crypto prediction market sites
and other crypto-friendly systems.
These environments can experience higher volatility, meaning that prices can move more quickly and more frequently. This is particularly relevant when trading on decentralized platforms, interacting with liquidity pools, or executing larger transactions in smaller markets.
Because crypto markets can shift rapidly, slippage is often more noticeable. Even small delays in execution can lead to price changes, especially during periods of high activity.
Slippage comparison
Slippage can appear in different forms, depending on things like market conditions, liquidity, and how quickly prices move. Below, we’ve broken down the main types of slippage you may come across when trading event contracts on prediction market sites, along with their typical causes and effects.
| Type of slippage | What it means | Main cause | Impact |
| Positive slippage | Trade executes at a better price than expected | Price moves in your favor | Improves your position |
| Negative slippage | Trade executes at a worse price than expected | Price moves against you | Reduces potential returns |
| Liquidity slippage | Not enough contracts at your chosen price | Low market activity | Worse average execution price |
| Volatility slippage | Prices change rapidly during execution | News or sudden sentiment shifts | Unpredictable pricing |
| Order Size slippage | Large trades move the market price | High-volume transactions | Less favourable overall price |
| Execution slippage | Delay between placing and completing a trade | Fast markets or platform latency | Small price differences |
| Crypto slippage | Slippage in crypto-based environments | Volatility and liquidity factors | Often higher than average |
What causes slippage in prediction markets?
Now that you know what slippage is, it’s time to look at what causes it. In prediction markets, several factors can contribute to slippage when you’re trading event contracts. Let’s take a look at some of these in a little more detail.
- Low liquidity:
in markets with fewer participants, there might not be enough people to buy and sell orders at your desired price. This can force your trade to go through at a different price
- Higher volatility:
when new information comes out, such as breaking news or live event updates, prices can shift quickly. This increases the likelihood of slippage
- Large order sizes:
bigger trades may need to be filled across multiple price levels, especially in smaller markets. This can lead to an average execution price that differs from what you initially expected
- Rapid market activity:
when many users are trading at the same time, prices can change rapidly. Even a short delay can result in a completely different execution price at the end of the day
How to reduce slippage
While it’s impossible to eliminate slippage, there are multiple ways that you can reduce its impact. Let’s take some of these things into consideration now, so that you can try to minimize the likelihood of slippage.
📈 Trade in Liquid Markets
Trade in liquid markets: generally speaking, markets with higher activity tend to have tighter pricing and more consistent execution, making them more reliable and less prone to slippage
📰 Avoid Major News Moments
Avoid major news moments: if possible, avoid trading during periods of sudden updates or announcements, when prices are more likely to move quickly. News can change sentiment unexpectedly and/or send people into a panic, shifting prices unpredictably
Break up large trades: splitting a larger order into smaller ones can help reduce the price impact. This is a simple but effective method to use that may reduce the overall slippage
Monitor market depth: understanding how many contracts are available at different price levels can give you a better sense of potential slippage, so it’s good to do your research here. Check in on market activity regularly, in order to make better predictions and potentially avoid slippage.
Pros and cons of slippage
Pros and cons
- Positive slippage gives a favorable entry or exit price
- High activity improves liquidity
- Sign of how markets respond to supply and demand
- Negative slippage reduces potential returns
Slippage – understanding this concept will help your future predictions
As we’ve seen, slippage is a very simple concept, but it plays a vital role in how smoothly your trades are executed on prediction market sites. Whether you’re buying or selling event contracts, the final price you get can differ slightly from what you expected due to many variables, such as fast-moving markets, liquidity conditions, or sudden shifts in sentiment.
Therefore, understanding slippage helps you approach trading and make predictions with more clarity and better timing. Although it can sometimes work in your favor, slippage is usually something that you want to manage effectively, especially in volatile or fast-changing markets.
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Slippage FAQs
❓ What is slippage in simple terms?
Slippage is the difference between the price you expect when making a trade and the price at which it is actually executed. It happens when prices move during the short time between placing and completing a trade.
🤔 Can slippage be avoided completely?
No, slippage cannot be fully avoided in active markets. However, you can reduce its impact by trading in more liquid markets, avoiding high-volatility periods, and using appropriate trade settings where available.
📈 What does slippage mean in trading event contracts?
In prediction market sites, slippage refers to the change in price that can occur while you are buying or selling event contracts. Since prices update in real time based on trading activity, the final execution price may differ slightly from the one you saw.
