Slippage is the difference in price between the initially offered price and the actual price during execution. Because of the automated nature of DeFi market makers, it’s important to keep slippage in mind since, depending on the assets traded, the difference can be significant. ParaSwap has slippage settings, which allow you to set the percentage difference you will allow from the expected price to the final one.
However, to avoid slippage altogether, various things have to be considered:
Order volume: A single order with large amounts tends to cause a stronger price impact than smaller ones.
Low liquidity: When there is not enough of an asset pooled across different exchanges, smaller orders will also cause significant slippage.
Transaction speed: Depending on how much gas you allocate for a transaction, it can be left pending for a long time. If this wait time is too long, slippage might be significant by the time the transaction occurs, and depending on your transaction settings, it might fail altogether.