Slippage
Definition
Slippage is the difference between the price a trader expects, usually the quoted best price or the displayed probability, and the average price at which the order actually executes. In prediction markets it comes mostly from orders larger than the size at the best price, from prices moving between decision and execution, and from execution delays some venues apply in fast markets.
Why it matters
Slippage is an invisible cost that shows up only in the fill. It is largest exactly when traders are most eager, in fast or thin markets. Investors should estimate average cost from the book before trading, compare it with the executable ask rather than the displayed probability, and use price limits on anything but small orders.
Common misconceptions
- •Slippage against the displayed midpoint overstates it; measure against the executable ask or bid.
- •Market orders on Polymarket are limit orders priced to cross the book, so a price cap can still be set.
- •A delayed order cannot be cancelled during its delay window.
- •The label is only a starting point. Investor outcomes usually depend on the governing documents, cash-flow priority, valuation policy, disclosure quality, and manager discretion surrounding the term, not just the shorthand definition used in marketing materials.
Technical details
Estimating it before trading
Read cumulative depth at each level.
Compute the average price for the intended size.
Add the fee at each fill.
Compare with your breakeven probability; if the average cost exceeds it, the trade is negative expected value.
How investors apply the term
Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.
The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.
Frequently asked questions
- Why did my average execution price differ from the quoted price?
- Because your order took more than the best level, or the book moved. A 2,000-contract buy against asks of 500 at 40 cents, 1,000 at 42 and 1,500 at 45 averages 42.25 cents. Against the 37-cent displayed midpoint it looks like 5.25 cents of slippage; against the executable best ask it is 2.25 cents.
- Can slippage happen on small orders?
- Yes, in fast markets. Polymarket applies a 250-millisecond taker delay on selected crypto and finance up/down markets and a configured delay on some live sports markets; during the delay 'the order is pending and cannot be canceled,' and the book can change before it matches.
- How do I limit it?
- Set a price limit. A limit order executes 'only at your specified price or better'; a fill-or-kill order fills entirely or not at all; a fill-and-kill order fills what is available and cancels the rest. Each trades certainty of execution for control of price.