Price impact vs slippage: understand the price of a swap

A finite trade moves through available liquidity

An available market has depth: how much can trade at different conditions. A tiny trade can obtain a price close to the current marginal reference. A larger order consumes more of the available curve or orders and can have a different average price.

For an AMM, changing the input and output reserves changes the next marginal exchange rate. For an order book, consuming the best level can reach a more expensive level. The mechanism differs, but both explain why the latest displayed price is insufficient for a large order.

Concentrated liquidity makes the available depth depend on active ranges. A pool's total value does not mean every part is available along the whole path of your intended trade.

The quote should already incorporate the route's known liquidity rules for the requested size. You do not need a delay between quote and execution to obtain an unattractive quote.

Name the definition behind price impact

Interfaces can calculate impact relative to different references. One can compare pre-trade and post-trade marginal prices. Another can compare average execution with an initial spot price or another benchmark. These produce different percentages.

In a fee-free constant-product teaching pool with 100 X and 10,000 Y, the initial marginal price is 100 Y per X. Adding 10 X produces about 909.09 Y output, or about 90.91 Y per X on average.

That average is about 9.09% below the initial marginal reference. The pool's post-trade marginal price is another number, about 82.64 Y per X. A percentage using the before/after marginal change would therefore be different.

These calculations describe selected teaching reserves with no fees. When using a product's impact field, read its documented reference, units and sign convention. Do not turn one definition into a universal formula for every venue.

Compare quote and execution under the same conditions

Use another teaching example. A reference comparison suggests 100 output units for the chosen input, but the actual route quotes 98. It then executes for 97.5.

The route's quote already differed from the reference. The further output loss relative to the quote is 0.5 divided by 98, about 0.5102%. That second comparison answers what changed between quote and execution.

If it executes for 98, quote-to-execution loss is zero even though the original quote was below the selected reference. If it executes for more than 98, conditions moved favourably under that comparison. Signed conventions should handle that possibility explicitly.

Keep the input amount, mints and fee treatment the same when calculating the difference. Comparing a gross quote with a net receipt can accidentally classify a separate token fee as market movement.

Reference, quote and execution are separate

Tolerance defines the permitted outcome

For a simple exact-input quote of 98 units, a chosen 1% adverse tolerance gives a human-unit minimum of 97.02. The 97.5 execution in our example would satisfy that chosen bound.

A 0.5% tolerance instead gives 97.51 before any applicable integer-rounding details. The same 97.5 outcome falls below that illustrative bound. The program's actual integer threshold and semantics determine the real result.

A wider tolerance does not improve the expected exchange. It permits worse execution before the request must reject. Decide what result is acceptable rather than increasing the number until a trade stops failing.

The bound concerns the operation defined by the route. Setup expenses, network fees and certain token behaviours need their own interpretation. Read the final instruction or supported decoded preview, not just the slider.

Compare quotes with a consistent question

Fix the input, mints, swap mode and observation time as closely as practical. Record the route and fee inclusion. Compare the output you can actually use after the costs relevant to your task.

Changing order size can reveal depth, but splitting a trade is not a promise of the same total outcome. Each executed part can change state, incur costs and face new conditions.

If a swap rejects, inspect the actual error. A lower-bound failure calls for a fresh quote and a decision about its terms. An account, authority or funding error needs a different repair.

After execution, retain the quote and actual quantities. This gives a reproducible explanation of the result instead of a vague claim that the network had high slippage. See pool mechanics for the reserve calculation and minimum received for the bound.

Common questions