Understanding Price Impact, Slippage, and Warnings.
Thirdtrade provides various information signals to assist users in making informed trading decisions and safeguarding against potential losses. On this page, we will clarify the distinctions between price impact, slippage, and price warning.
Price Impact
Price impact refers to the change in the price of an asset due to the execution of a trade. It is especially relevant in Decentralized Exchanges (DEXs) and Automated Market Makers (AMMs) due to their liquidity model. The price impact is influenced by the liquidity available to settle the trade and the size of the trade.
The larger the trade compared to the size of the liquidity pool, the more significant the price impact will be. This is because the execution of the trade will shift the balance of tokens in the pool, which directly affects the price according to the AMM's formula.
To reduce price impact, users can split trades into several smaller trades over time.
Ensure you check the minimum number of destination tokens quoted on the Thirdtrade interface and set a slippage amount to protect yourself.
If the price impact or price deviation is too high, an additional modal will appear, asking you to confirm the trade.
Slippage
Slippage occurs when the price changes between the time you receive a quote and the time you execute the trade. If the price falls below your slippage rate, the transaction will fail. This prevents you from receiving fewer tokens than you expected.
By default, we have an
Auto setup for slippage. This means the slippage settings are automatically controlled.