Slippage Is an Execution Cost
Why is the price you got worse than the price you saw?
The idea
Slippage is the difference between the expected price and the average executed price, often caused by thin depth or fast movement.
In the real world
A large market buy fills across several asks at progressively higher prices.
Going deeper
The quoted price is only the best available price for the first unit. A larger market order consumes that level and continues into worse ones, so the average fill is worse than the quote by an amount set by depth and size.
This is a real cost that appears in no fee schedule and scales with your order. It is why the same strategy can be profitable on paper and unprofitable in practice, and why splitting a large order or using limit orders matters more as size grows. Estimating it beforehand simply means reading the book you are about to eat.
Where it stops applying
For small orders in deep markets slippage is negligible and not worth managing. It becomes the dominant execution cost in thin books, fast markets and large size.
Why it matters
It is a real cost that does not appear in the fee schedule, and it grows with your size.
Try this today
Estimate price impact and set a maximum acceptable slippage.
Test yourself
You see $1.00 and place a market buy. It fills at an average of $1.04. Nothing was wrong with the exchange. Where did the 4% go?
Show the answer
Into consuming the book. The quote was only the best ask, and there was not enough size there, so the rest filled at progressively worse levels. That difference between expected and average executed price is a cost of the order itself.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.